Self-employed expenses: 10 questions before filing
Practical answers on mileage, phones, equipment, insurance, courses, meals, family wages and unpaid invoices for Canadian self-employed tax preparation.
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For trades, healthcare practices, consulting, creative work and commission businesses, a useful expense review starts with what was purchased and how it helped earn income.
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21. What mileage records does a self-employed person need?
Keep total kilometres and business kilometres for each vehicle, plus the date, destination, purpose and distance of business trips. Opening and closing odometer readings support the annual percentage. CRA describes a simplified logbook option after a representative full base year, but it has conditions. A percentage chosen because it “sounds about right” is not a substitute for evidence.
First step: Start a dated log now and save fuel, insurance, repairs, financing and vehicle purchase records separately.
Official guidance: Motor vehicle records
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22. Can I deduct my entire mobile phone and internet bill?
Only the business portion of a mixed-use expense is generally deductible. A separate business phone, shared household internet and the cost of buying a device can have different treatment. Use a reasonable basis that reflects actual use and keep supporting bills. Do not claim the same cost again as part of home-office expenses.
First step: Write down how you determined the business percentage and flag device purchases separately from monthly service charges.
Official guidance: Self-employed Business, Professional, Commission, Farming, and Fishing Income: Chapter 3 – Expenses
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23. Can I immediately write off a new laptop or expensive tool?
Not automatically. An asset with an enduring benefit can be a capital purchase rather than an ordinary operating expense. Its tax deduction depends on the asset class, acquisition and available-for-use dates, business use and applicable incentives. A credit-card charge does not establish that the whole amount is deductible in the purchase year.
First step: Keep the invoice, date first used, financing details and any trade-in or sale information for the old equipment.
Official guidance: Business expenses
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24. Which insurance costs belong in my business expenses?
Ordinary commercial coverage for business property and equipment can be deductible. Vehicle and home-workspace insurance are considered within those expense categories, using the appropriate business portion. Personal life insurance is generally not an ordinary business deduction; narrow exceptions need separate review. A bundled policy may therefore need to be separated before it is entered.
First step: Bring the policy schedule as well as the payment total so the insured risks can be identified.
Official guidance: Business expenses
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25. Can I deduct a course that helps my self-employed work?
The purpose and nature of the course matter. Training that maintains existing business skills can be treated differently from training that creates a new qualification or enduring benefit. Personal-interest courses do not become business expenses merely because you discuss them with customers. CRA’s specific training bulletin is archived, so its guidance needs to be considered with the current expense rules and your facts.
First step: Provide the syllabus, invoice and a short explanation of how the course relates to your existing services.
Official guidance: ARCHIVED - Expenses of training · Business expenses
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26. Are business meals fully deductible?
The usual limit is 50% of the lesser of the amount incurred and a reasonable amount, with specific exceptions. A meal still needs a business purpose before that limit is considered. Travel meals are not automatically exempt from it. Record who attended and why the meeting related to earning income, rather than keeping only a restaurant’s total.
First step: Separate personal meals, client meetings and travel meals and retain itemized receipts.
Official guidance: Line 8523 – Meals and entertainment
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27. Can I deduct wages paid to my spouse or child?
A reasonable wage for real work in the business can be deductible; a family transfer with no services behind it is different. Keep evidence of duties, hours and actual payment. Payroll income-tax and reporting requirements still apply. EI treatment for related employees needs its own review, so do not assume a family member is automatically included or automatically exempt.
First step: Document the role and pay rate before payment and confirm the payroll setup.
Official guidance: Line 9060 – Salaries, wages, and benefits (including employer's contributions) · Employee who is a family member or a related person
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28. Do unpaid customer invoices count as income?
Under the accrual method, income is reported when earned, not only when cash reaches your bank. Most self-employed businesses use that method. Farmers, fishers and self-employed commission agents may have a cash-method option under the rules. Delaying collection does not necessarily postpone the income-tax year. Your records need a list of amounts customers still owe at year-end.
First step: Prepare an aged receivables list and identify your established accounting method.
Official guidance: Accounting methods
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29. Can I deduct a customer invoice that will never be paid?
A business bad-debt deduction generally requires the receivable to have been included in income and to have become a bad debt in the year claimed. A merely late payment is not automatically uncollectible. Keep the invoice and evidence supporting the conclusion, such as collection correspondence or insolvency information. Treat any later recovery consistently with the tax rules.
First step: Separate genuinely uncollectible balances from overdue accounts that are still being pursued.
Official guidance: Self-employed Business, Professional, Commission, Farming, and Fishing Income: Chapter 3 – Expenses
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30. Does paying myself from my sole proprietorship reduce its profit?
No. Owner drawings are not deductible wages. The business’s income and eligible expenses determine the taxable profit; moving money from a business account to your personal account does not create a new expense. A sole proprietorship is different from a corporation paying remuneration to an owner. This distinction also helps explain why your bank balance and taxable profit can differ.
First step: Label owner transfers clearly so they are not mixed into employee wages or operating costs.
Official guidance: Line 9060 – Salaries, wages, and benefits (including employer's contributions)
General information, not an individual tax or legal opinion. Eligibility, elections and deadlines depend on the facts and tax year. Annual CRA forms may describe a specific year; use the form and limits for your return. No particular deduction, refund or tax saving is guaranteed.
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