# T2125 expense categories, and which line each receipt belongs on

> Self-employed Canadians report business expenses in Part 4 of Form T2125, where each kind of expense has its own numbered line: 8521 for advertising, 8523 for meals and entertainment at 50%, 8810 for office expenses, 8860 for professional fees, 9200 for travel, 9281 for motor vehicle costs and 9270 for anything else. Equipment is claimed through capital cost allowance on line 9936, and home-office costs go on line 9945.

Source: https://simpleloonie.ca/guides/t2125-expense-categories
Published: 2026-09-25 · Last reviewed: 2026-09-25

## Key facts

- **Form:** T2125, Statement of Business or Professional Activities
- **Who files it:** Sole proprietors and partners, with the T1 return
- **Expense section:** Part 4, lines 8521 to 9270
- **Meals and entertainment:** Line 8523, generally 50% deductible
- **Equipment over time:** Capital cost allowance, line 9936
- **Home office:** Line 9945, calculated separately

## What is the T2125, and who has to file it?

Form T2125, the Statement of Business or Professional Activities, is how a sole proprietor or a partner in a partnership reports business income and expenses on a personal T1 return. Freelancers, contractors, consultants, tradespeople and anyone else earning self-employment income file one per business. A corporation does not: it files a T2 instead.

The form has a numbered line for each broad kind of expense. The line numbers matter more than they look, because the CRA compares each line against what similar businesses report. A receipt on the wrong line does not usually change your tax, but it can make a return look unusual for reasons that have nothing to do with what you spent.

## Which T2125 line does each expense go on?

*Common T2125 Part 4 expense lines and the receipts that belong on them*
| Line | Name | Typical receipts |
| --- | --- | --- |
| 8521 | Advertising | Online ads, print ads, sponsorships, business cards, promotional items |
| 8523 | Meals and entertainment | Client meals, event tickets; generally only 50% is deductible |
| 8590 | Bad debts | Invoiced income you already reported and could not collect |
| 8690 | Insurance | Business liability, equipment and professional insurance |
| 8710 | Interest and bank charges | Business loan interest, account fees, card processing fees |
| 8760 | Business taxes, licences and memberships | Business licences, professional dues, trade memberships |
| 8810 | Office expenses | Small items such as pens, stationery, paper clips and stamps |
| 8811 | Office stationery and supplies | Supplies used up directly in delivering your service |
| 8860 | Professional fees | Accounting, bookkeeping and legal fees |
| 8871 | Management and administration fees | Management fees paid to run the business |
| 8910 | Rent | Rent for business premises or equipment, not your home |
| 8960 | Repairs and maintenance | Repairs to business equipment and premises |
| 9060 | Salaries, wages and benefits | Pay to employees, including your share of CPP and EI |
| 9200 | Travel expenses | Flights, trains, hotels and taxis for business trips |
| 9220 | Telephone and utilities | Business phone and internet; heat and hydro for business premises |
| 9275 | Delivery, freight and express | Couriers, shipping and postage for goods sent out |
| 9281 | Motor vehicle expenses | Fuel, insurance, repairs and parking, for the business-use share only |
| 9270 | Other expenses | Anything real and business-related that fits no other line |
| 9936 | Capital cost allowance | Computers, furniture, tools and vehicles, claimed over several years |
| 9945 | Business-use-of-home expenses | The business share of rent, utilities and insurance for a home office |

Line names on the current form are the authority; the receipts in the right-hand column are the common cases, not an exhaustive list. Where a receipt could honestly go on two lines, pick one and use it consistently every year.

## Which receipts do people most often put on the wrong line?

- A laptop, phone or desk is usually a capital purchase, not an office expense. It is claimed through capital cost allowance on line 9936 over several years rather than all at once on line 8810.
- A restaurant bill is meals and entertainment on line 8523, and only half of it is generally deductible — not travel on line 9200, even when you ate it on a trip.
- Your own home rent or mortgage does not go on line 8910. The business share of home costs is worked out separately and goes on line 9945.
- Car costs go on line 9281 at the business-use percentage from a mileage log, not at 100%. Parking for a client visit is usually fully business, but it still belongs with the vehicle.
- Card processing fees and bank charges are line 8710, not office expenses.
- GST/HST you will claim back as an input tax credit is not part of the expense. If you are a registrant, record the expense net of the recoverable tax.

## Do I record expenses with or without the GST/HST?

It depends on whether you are registered for the GST/HST. A registrant claims the tax paid on business purchases back as an input tax credit, so the expense on the T2125 is the amount before that tax. If you are not registered — most often because you are still a small supplier — you cannot claim the credit, so the tax is simply part of what the thing cost and the whole amount is the expense.

This is the main reason to capture the tax as a separate number rather than just the total. The same receipt produces a different T2125 figure depending on your registration status, and a total with the tax baked in cannot be split afterwards without going back to the paper.

## How should I organise receipts so the T2125 is quick to fill in?

1. **Name your categories after the lines** — Use expense categories that map one-to-one onto T2125 lines, or that your accountant can map in a single pass. "Software" and "Office supplies" are fine as long as everyone knows which line each one rolls up to.
2. **Categorise when the receipt comes in** — Deciding where a receipt goes is easy on the day and hard in April. Attach the category, the tax amount and the business purpose at capture time.
3. **Keep the tax separate** — Record GST, HST, PST and QST as their own amounts so the expense can be reported net or gross depending on your registration status.
4. **Total by category at year end** — Export the year, total by category, and each total becomes a T2125 line. Keep the receipt images: the CRA can ask for them for six years.

SimpleLoonie does the capture half of this. The AI reads each receipt, assigns it to one of your expense categories, and records GST, HST, PST and QST as separate amounts. The categories are yours to rename, add to and describe, so they can mirror the T2125 lines your accountant uses, and the year exports to Excel or CSV totalled however you need. It does not file the T2125 or decide what is deductible; those remain your accountant's calls.

## Frequently asked questions

### What is Form T2125 used for?

Form T2125 is the Statement of Business or Professional Activities. Sole proprietors and partners use it to report self-employment income and expenses on their personal T1 income tax return, with one form for each business they operate.

### Which T2125 line is for software subscriptions?

Business software subscriptions are usually reported as office expenses on line 8810 or, where they fit nowhere else, on line 9270 for other expenses. Software you buy outright and use for years can instead be a capital purchase claimed through capital cost allowance. Pick one treatment and use it consistently.

### Can I deduct a new computer in full in the year I buy it?

Generally not on an ordinary expense line. A computer is a capital property, so its cost is claimed through capital cost allowance on line 9936 over several years at the rate for its class. Temporary accelerated rules have applied in some years, so check the current T4002 guide or ask your accountant.

### Where do phone and internet bills go on the T2125?

The business-use portion of phone and internet costs goes on line 9220, telephone and utilities. If the same phone or internet plan is also used personally, only the business share is deductible, and you should be able to explain how you worked it out.

### Do I need receipts for every expense on the T2125?

You do not send receipts with the return, but you must keep them for six years from the end of the tax year and produce them if the CRA asks. An expense you cannot support with a receipt or equivalent record can be denied in a review.

### Does SimpleLoonie fill in my T2125?

No. SimpleLoonie reads receipts, sorts them into your expense categories and separates the sales tax, and it exports the year to Excel or CSV so the category totals are ready for you or your accountant. Choosing lines, deciding what is deductible and filing the return stay with you and your accountant.

## Sources

- [Canada Revenue Agency — Expenses section of form T2125](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/completing-form-t2125/expenses-section-form-t2125.html)
- [Canada Revenue Agency — Guide T4002, Chapter 3: Expenses](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4002/t4002-5.html)
- [Canada Revenue Agency — Business expenses](https://www.canada.ca/en/revenue-agency/services/tax/businesses/small-businesses-self-employed-income/business-expenses.html)