What are the expense categories on the T2125?

Part 4 of the T2125 lists expense lines including advertising (8521), meals and entertainment (8523), bad debts (8590), insurance (8690), interest and bank charges (8710), business taxes and licences (8760), office expenses (8810), office stationery and supplies (8811), professional fees (8860), management and administration fees (8871), rent (8910), repairs and maintenance (8960), salaries and wages (9060), property taxes (9180), travel (9200), utilities (9220), fuel (9224), delivery and freight (9275), motor vehicle expenses (9281), other expenses (9270), capital cost allowance (9936), and business-use-of-home (9945).

How does capital cost allowance work on the T2125?

Capital assets like equipment, furniture, and vehicles are not deducted in full the year you buy them. Instead you claim capital cost allowance (CCA, line 9936), which spreads the cost over several years based on the asset's CCA class and rate. A half-year rule usually limits the claim in the year of purchase, and CCA is optional in any given year, so you can choose not to claim it to preserve deductions for later.

Can I deduct business use of my home on the T2125?

Yes, if you use part of your home as your principal place of business or regularly to meet clients. You prorate home costs (utilities, insurance, property tax, mortgage interest, rent) by the business-use percentage and enter the result on line 9945. A key limit: business-use-of-home expenses cannot create or increase a business loss, so any excess carries forward to a future year.

Do I deduct the GST/HST I pay on business expenses?

It depends on whether you are registered for GST/HST. If you are registered, you generally recover the GST/HST you pay as input tax credits on your GST/HST return, so your income-tax expenses are recorded net of that recoverable tax, you do not also deduct it on the T2125. If you are not registered, the GST/HST you pay is simply part of the expense.

How much of meals and entertainment can I deduct in Canada?

Generally 50 percent, on line 8523. The same 50 percent limit applies to most business meals and entertainment. Keep the receipts and the business purpose. There are limited exceptions (for example certain all-staff events), but the default for client and business meals is half.

What cannot be deducted on the T2125?

Personal expenses, the owner's own drawings (money taken out of the business is not an expense), the personal portion of home or vehicle costs, most club and recreational dues, the non-deductible half of meals, fines and penalties, life insurance premiums in most cases, and income tax itself. Capital assets are not deducted in full either; they are claimed over time through CCA.

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T2125 Expense Categories Explained: A Line-by-Line Guide

By Rashad Bayram•July 9, 2026•Updated July 14, 2026•10 min read

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Frequently Asked Questions

What are the expense categories on the T2125?: Part 4 of the T2125 lists expense lines including advertising (8521), meals and entertainment (8523), bad debts (8590), insurance (8690), interest and bank charges (8710), business taxes and licences (8760), office expenses (8810), office stationery and supplies (8811), professional fees (8860), management and administration fees (8871), rent (8910), repairs and maintenance (8960), salaries and wages (9060), property taxes (9180), travel (9200), utilities (9220), fuel (9224), delivery and freight (9275), motor vehicle expenses (9281), other expenses (9270), capital cost allowance (9936), and business-use-of-home (9945).
How does capital cost allowance work on the T2125?: Capital assets like equipment, furniture, and vehicles are not deducted in full the year you buy them. Instead you claim capital cost allowance (CCA, line 9936), which spreads the cost over several years based on the asset's CCA class and rate. A half-year rule usually limits the claim in the year of purchase, and CCA is optional in any given year, so you can choose not to claim it to preserve deductions for later.
Can I deduct business use of my home on the T2125?: Yes, if you use part of your home as your principal place of business or regularly to meet clients. You prorate home costs (utilities, insurance, property tax, mortgage interest, rent) by the business-use percentage and enter the result on line 9945. A key limit: business-use-of-home expenses cannot create or increase a business loss, so any excess carries forward to a future year.
Do I deduct the GST/HST I pay on business expenses?: It depends on whether you are registered for GST/HST. If you are registered, you generally recover the GST/HST you pay as input tax credits on your GST/HST return, so your income-tax expenses are recorded net of that recoverable tax, you do not also deduct it on the T2125. If you are not registered, the GST/HST you pay is simply part of the expense.
How much of meals and entertainment can I deduct in Canada?: Generally 50 percent, on line 8523. The same 50 percent limit applies to most business meals and entertainment. Keep the receipts and the business purpose. There are limited exceptions (for example certain all-staff events), but the default for client and business meals is half.
What cannot be deducted on the T2125?: Personal expenses, the owner's own drawings (money taken out of the business is not an expense), the personal portion of home or vehicle costs, most club and recreational dues, the non-deductible half of meals, fines and penalties, life insurance premiums in most cases, and income tax itself. Capital assets are not deducted in full either; they are claimed over time through CCA.

About the author

Rashad Bayram

Writer & technology consultant focused on Islamic finance, halal Bitcoin, AI agents, and startups. Exploring ideas that matter with care and curiosity.

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