Form T2125 (Statement of Business or Professional Activities) is where Canadian self-employed individuals, freelancers, and sole proprietors report their business income and expenses. Understanding each expense category on this form ensures you claim everything you are entitled to — and nothing that will trigger a CRA reassessment.
This guide walks through every expense line on Form T2125, Part 5, with examples and receipt requirements for each category.
Part 5: Business Expenses
Line 8521 — Advertising
Online ads, print advertising, business cards, signage, website costs, social media advertising, sponsorships. Must be directed at the Canadian market for full deduction. Keep invoices and ad platform receipts.
Line 8523 — Meals and Entertainment
Business meals, client entertainment, event tickets. Subject to the 50% deduction limit. Record attendees and business purpose on each receipt.
Line 8590 — Bad Debts
Client invoices you have made reasonable efforts to collect but determined to be uncollectable. You must have previously included the amount in income. Document your collection efforts.
Line 8690 — Insurance
Business liability, professional liability (E&O), commercial property, and business vehicle insurance premiums. Keep policy documents and payment receipts.
Line 8710 — Interest and Bank Charges
Interest on business loans and credit, business bank account fees, credit card fees (business-use portion), and payment processing fees (Stripe, PayPal, Square).
Line 8810 — Office Expenses
Pens, paper, ink, postage, envelopes, and other small office supplies. Do not include furniture or equipment here — those go under CCA.
Line 8811 — Supplies
Materials consumed in providing your services — packaging, raw materials, cleaning supplies. Distinct from office expenses, which are for running the office itself.
Line 8860 — Professional Fees
Accounting, legal, consulting, and bookkeeping fees. Tax preparation fees for your business return are also deductible here.
Line 8871 — Management and Admin Fees
Fees paid for management or administrative services, including virtual assistant services and property management fees for rental businesses.
Line 8910 — Rent
Rent for commercial office, retail, or warehouse space. Note: rent for your home office is claimed separately under business-use-of-home expenses.
Line 8960 — Repairs and Maintenance
Repairs to business property and equipment. Improvements that increase the property’s value are capital expenditures (CCA), not repairs.
Line 9060 — Salaries, Wages, and Benefits
Employee wages, employer CPP and EI contributions, health benefits, and retirement plan contributions. Keep payroll records and T4 slips.
Line 9180 — Property Taxes
Property taxes on business-owned real estate. Home office property taxes go under business-use-of-home expenses.
Line 9200 — Travel
Airfare, hotels, car rentals, taxis, and train tickets for business travel. Meals during travel go under Line 8523 (subject to 50% limit).
Line 9220 — Telephone and Utilities
Business phone, internet, and utility bills. For home-based businesses, the business-use portion of personal phone and internet. Home utilities go under business-use-of-home expenses.
Line 9224 — Fuel Costs
Fuel for delivery vehicles or equipment. Personal vehicle fuel goes under motor vehicle expenses, not here.
Line 9275 — Delivery, Freight, and Express
Shipping, courier, postage, and freight charges for business deliveries.
Line 9270 — Motor Vehicle Expenses
The business-use portion of all vehicle expenses: fuel, insurance, maintenance, lease payments, interest, licence fees. Based on your log book business-use percentage.
Business-Use-of-Home Expenses
Claimed separately from the Part 5 expenses above, this section covers the business-use portion of your home office expenses: rent, utilities, insurance, property taxes, mortgage interest, and maintenance.
Capital Cost Allowance (CCA)
Assets like computers, furniture, vehicles, and equipment are not expensed in the year of purchase — they are depreciated over time using CCA. Each type of asset falls into a CCA class with its own depreciation rate.
Organizing Receipts by Category
The best way to file your T2125 accurately is to categorize expenses throughout the year, not at tax time. SparkReceipt’s AI receipt scanner automatically categorizes receipts as you scan them. Connect your email for automatic digital receipt capture, and generate expense reports that map to T2125 categories.
For documentation requirements, see our guide to CRA receipt requirements.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified Canadian tax professional for your specific situation.
