T2125 expense categories, line by line
Form T2125 is where a sole proprietor reports business income and expenses on their personal return. Sorting expenses into the right lines all year makes April far easier. Here's what goes where.
Income
Your sales, commissions and fees go on line 8000, after taking out any GST/HST you collected. Other business income, like a grant or a refund of an expense from a past year, goes on line 8230.
The expense lines people use most
- 8521 Advertising: ads, flyers, a website, business cards
- 8523 Meals and entertainment: only half of what you spend can be claimed
- 8690 Insurance: business insurance, not your own life or health insurance
- 8710 Interest and bank charges: business loan interest and bank fees
- 8760 Business taxes, licences and memberships
- 8810 Office expenses and 8811 stationery and supplies
- 8860 Professional fees, including accounting and legal
- 8910 Rent for business space that isn't your home
- 9200 Travel, 9220 utilities, 9275 delivery and freight
- 9281 Motor vehicle expenses, at your business-use share
- 9945 Business-use-of-home expenses, at the share of your home used for work
Your car: actual costs, not a rate per km
Self-employed people claim the real cost of running the car (fuel, insurance, repairs, licence, lease or interest) times the share of kilometres driven for business. Keep a logbook of business trips and the odometer at the start and end of the year. The per-km rates you see are for employers paying allowances, not for your own return.
Equipment that lasts
A laptop, tools or furniture that last for years aren't deducted all at once. They go into capital cost allowance (line 9936), a share each year. Keep the receipt and the date you started using it.
Home office
If you work from home, a share of rent or mortgage interest, utilities, home insurance and property tax can be claimed on line 9945. The share is usually the work area divided by the whole home. It can't create or increase a business loss; what's left carries forward to next year.
Common questions
Can I claim my phone?
Yes, the business share of your phone and internet goes on line 9220. If you use it half for work, claim half.
What about GST/HST I paid?
If you're registered, leave it out of the expense and claim it back as an input tax credit on your GST/HST return. If you aren't registered, it's part of the cost.
Do I need receipts?
Yes. Keep them for six years after the end of the tax year. A photo or a bank statement line is better than nothing, but a receipt is what the CRA asks for.
General information for the 2026 tax year, from the CRA's guide T4002. Check the guide or an accountant for your own situation.