Most freelancers and self-employed individuals claim only the obvious deductions — and leave hundreds or thousands of dollars on the table every year. This guide covers 15 legitimate deductions available to self-employed people in Canada (CRA T2125) and the United States (IRS Schedule C).
Disclaimer: Tax laws change. This article reflects general principles as understood in 2025–2026. Always verify with the CRA or IRS and consult a qualified tax professional before filing.
1. Home Office
Canada: If you use a workspace in your home regularly and exclusively for your business, you can deduct a proportional share of your rent, utilities, and internet. Calculate the percentage as: office square footage ÷ total home square footage. Claimed on T2125, Part 7. You cannot use this deduction to create or increase a business loss — any unused amount carries forward.
United States: The IRS offers two methods via Form 8829: the simplified method ($5 per sq ft, up to 300 sq ft = max $1,500) or the regular method (actual home expenses × business-use percentage). The space must be used regularly and exclusively for business.
2. Vehicle and Mileage
Canada: Self-employed individuals deduct actual vehicle expenses multiplied by the business-use percentage (business km ÷ total km for the year). Keep a detailed logbook: date, destination, business purpose, and kilometres driven.
United States: You can use the IRS standard mileage rate (67¢/mile for 2024; check IRS Notice for the current year) or deduct actual vehicle expenses. You must choose your method in the first year you use the vehicle for business.
3. Phone and Internet
You can deduct the business-use portion of your phone and internet bills. If you use your phone 60% for business, deduct 60% of the bill. Keep records to justify the percentage you claim.
4. Professional Development and Education
Courses, workshops, books, and online subscriptions that maintain or improve skills required in your current work are deductible. A new career change does not qualify — the training must relate to your existing business.
5. Software and Subscriptions
Business software (accounting, design, project management, cloud storage) used for your work is fully deductible. Subscriptions with mixed personal/business use must be prorated.
6. Office Supplies
Paper, printer ink, pens, postage, and other consumables used for your business are deductible in the year purchased.
7. Professional Fees
Accountant fees, legal fees related to your business, and bookkeeping costs are deductible. The cost of TaxSort Pro is also a deductible business expense.
8. Equipment and Technology
Canada: Capital cost allowance (CCA) lets you depreciate computers, cameras, and equipment over time (Class 50 for computers: 55% declining balance). Immediate expensing rules may allow a larger first-year deduction — check the CRA website for the current rules.
United States: Section 179 allows you to deduct the full cost of qualifying equipment in the year of purchase (up to the annual limit). Consult IRS Publication 946 for current limits.
9. Marketing and Advertising
Website hosting, domain names, social media ads, business cards, and promotional materials are all deductible business expenses.
10. Business Meals (50%)
Both the CRA and IRS allow a deduction of 50% of meal expenses incurred for business purposes — meeting with a client or discussing business with a partner. Keep receipts and note the business purpose and who attended.
11. Professional Memberships and Dues
Industry association fees, professional licensing fees, and dues for organizations directly related to your work are deductible.
12. Business Travel
Flights, hotels, and ground transportation for business trips are deductible. Purely personal portions of a mixed trip are not. Keep all receipts and document the business purpose of each trip.
13. Health Insurance Premiums (US Only)
Self-employed individuals in the US who are not eligible for employer-sponsored health coverage can deduct 100% of health insurance premiums for themselves and their family on Schedule 1 of Form 1040 — not on Schedule C, but it reduces adjusted gross income. See IRS Publication 535.
14. Retirement Contributions
Canada: RRSP contributions reduce your taxable income. The annual contribution limit is 18% of your previous year's earned income, up to the CRA's annual maximum (check My Account at canada.ca for your personal room).
United States: SEP-IRA contributions (up to 25% of net self-employment earnings, subject to annual IRS limits) and Solo 401(k) contributions are deductible. See IRS Publication 560.
15. Bank Fees and Interest
Monthly fees on a business bank account, interest on a business loan or business credit card, and transaction fees are all deductible. Keep business and personal accounts separate to make this straightforward.
Keep Good Records
The CRA requires you to keep records for six years from the end of the tax year they relate to. The IRS generally requires records for three years (six if you underreported income by more than 25%). Digital records are accepted by both authorities provided they are legible and complete.
TaxSort automatically captures, categorizes, and stores your receipts — so you have documentation ready when you need it.
Track every deduction automatically
TaxSort scans receipts, tracks mileage, and keeps your records organized year-round — so tax time is never stressful.
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