Business Expense Categories for Canadian Self-Employed Workers
A complete guide to the CRA's business expense categories on Form T2125 — what each line includes, what's excluded, and how to categorize common freelancer expenses correctly.
ST
Sarah Tremblay
CPA, Tax Advisor
7 min read·
CRA Form T2125 has 22 expense lines. Using the right one for each expense isn't just about organization — wrong categorization can trigger questions during a review. Here's how to correctly classify the most common freelancer expenses.
Key T2125 Expense Lines Explained
- Advertising: website ads, social media campaigns, business cards, print advertising
- Meals and entertainment: 50% of client meals, networking events — must note business purpose
- Office expenses: stationery, printer ink, postage, small office supplies (not furniture)
- Professional fees: accountant, lawyer, consultant fees directly related to your business
- Telephone and utilities: business-use portion of your phone and internet bills
- Travel: flights, hotels, ground transport for business trips (not commuting)
- Other expenses: software subscriptions, cloud storage, professional development, dues
Common Categorization Mistakes
- Putting software subscriptions under 'Office expenses' instead of 'Other expenses' — both work, but be consistent
- Deducting 100% of meals when only 50% is allowable (the most common CRA adjustment)
- Mixing equipment purchases (which belong in Capital Cost Allowance) with operating expenses
- Claiming personal travel as business travel without documentation of the business purpose
The CRA publishes the T2125 guide (T4002) each tax year with updated descriptions of what belongs in each line. When in doubt, read the guide or ask your accountant — consistency year over year matters more than minor categorization variations.
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