How do CRA business expenses work for side hustles?

In Canada, side-hustle expenses generally reduce your net income: you report income, subtract eligible business expenses, and pay tax on the remainder.

How it’s usually reported

• Most sole proprietors use Form T2125 with their T1 return.

What CRA usually allows

• The expense must be for earning business income.
• The amount should be reasonable for the work you do.
• If something is used for both personal and business purposes, claim only the business-use portion.

Common deductions

• Home office: prorated share of eligible home costs if you meet CRA rules
• Vehicle: business-use portion only; keep a mileage log
• Operating costs: phone, software, advertising, web hosting, office supplies
• Big purchases: items like computers or furniture are often claimed over time through CCA

Keep records

• Save receipts, invoices, and mileage logs
• CRA commonly expects records kept for six years

Bottom line
For a side hustle, the key is tracking what’s truly business-related and only claiming the business share. Home office and vehicle claims have extra rules, so check the current CRA guidance before filing.