Deducting your business website: a tax guide for self-employed Canadians (with Quebec specifics)

Current expense or capital expense: what's the difference for a website?

An expense you incur to earn business income is deductible, but a capital expense isn't written off all at once: it's depreciated under the CCA rules. According to the CRA, a capital expense generally gives a lasting benefit or advantage, while a current expense usually recurs after a short period.

For a website, what you pay every month or every year to keep it running is a current expense. What you pay once to build or rebuild it can be a capital expense.

Which website costs can you deduct this year?

Recurring costs are deductible in the year you incur them, for the portion used in your business:

• Hosting and the yearly renewal of your domain name.
• A maintenance plan: updates, backups, security, small fixes and content changes.
• Subscriptions to a platform (Wix, Squarespace, Shopify), plugins or professional email.
• Online advertising. According to the CRA, the Canadian content requirements that apply to some advertising don't apply when you advertise on foreign websites.
• Watch out for prepayments: if you pay three years of hosting up front, only the current year's portion is deductible this year.

Building the site: what the CRA says

This is where it gets tricky. The CRA's T4002 guide doesn't address websites specifically, but the CRA has taken a position in technical interpretations, notably in 2010 and 2013. Its view: there are no fixed rules. Where the site will only have a relatively short useful life, the costs should be treated as a current expense; where it's expected to have a long useful life, as a capital expense.

The CRA also asks you to look at the different components of the cost separately. In its view, application software, including software bought from third parties to build the site, and the labour to design and develop the software that runs the site go in Class 12. These letters reflect the CRA's position at the time they were written; they are not law.

In practice, a brochure site built to last several years, or a complete redesign, looks more like a capital expense. But for a site that costs a few thousand dollars, the gap between the two treatments is often small in the first year, as the next section shows.

A special case: the domain name. Registering it and renewing it every year is a current expense. Buying an existing domain from its owner looks more like the purchase of a lasting intangible asset. I couldn't find any CRA publication on this specific case; since 2017, intangible capital property that doesn't fit any other class generally goes into Class 14.1, at a 5% rate. Check with your accountant.

Class 12 and the accelerated investment incentive: how much can you deduct in the first year?

If building the site is a capital expense, the software portion goes into Class 12, at a 100% rate. Normally, this software is subject to the half-year rule: in the year you acquire it, you can only claim half the cost.

The accelerated investment incentive changes that. The Budget 2025 Implementation Act, No. 1, which received Royal Assent on March 26, 2026, reinstated it for property acquired after 2024. For that property, the half-year rule doesn't apply: in Class 12, the deduction can reach 100% of the cost in the first year if the property becomes available for use before 2030. The incentive is then gradually phased out from 2030 to 2033, depending on the class.

In practical terms, a site paid for and launched in 2025 or 2026 and treated as Class 12 property can generally be deducted in full that year. CCA is claimed from the time the property becomes available for use, and it's optional: you can claim any amount from zero up to the maximum allowed.

What about the computer that runs your business?

The CRA states that you can't deduct the cost of a computer or cellphone directly: it goes into Class 50, at a 55% rate. The good news: a new computer acquired after April 15, 2024 that becomes available for use before 2027 qualifies for a 100% first-year deduction, a measure confirmed by the same March 2026 law. If it becomes available for use in 2027 or later, it still qualifies for an enhanced deduction, but it no longer reaches 100%. If you also use it for personal purposes, only deduct the business portion.

Quebec's Ministère des Finances has announced that it is harmonizing with these federal accelerated CCA measures; CCA is calculated in Part 5 of the TP-80-V. Quebec's additional 30% deduction, which applied among other things to Class 50 computer equipment, was abolished on January 1, 2024.

Where do these amounts go on the T2125 and the TP-80?

Federally, your business income and expenses go on form T2125, Statement of Business or Professional Activities. In Quebec, you also complete form TP-80-V, Business or Professional Income and Expenses, and carry the result to Schedule L of your Quebec return. Both forms ask for your website addresses if your business earns income online.

Here are the lines that matter. Line 8810 of the T2125 (office expenses), on the other hand, is meant for small items such as pens, paper and stamps.

• Online advertising: line 8521 of the T2125, line 200 of the TP-80-V.
• Hosting, domain, maintenance plan, subscriptions: line 9270 (other expenses) of the T2125, line 246 of the TP-80-V, specifying what they are.
• Accounting and legal fees: line 8860 of the T2125, line 228 of the TP-80-V.
• Class 12 website and Class 50 computer: line 9936 of the T2125, calculated in Area A, and line 240 of the TP-80-V, calculated in Part 5.

GST and QST on the invoice: registrant or small supplier?

You're a small supplier if your taxable supplies don't exceed $30,000 in a given calendar quarter or over the four preceding calendar quarters. In that case you don't have to register for the GST/HST and the QST, but you can choose to register voluntarily.

If you're registered, you recover the GST paid on the invoice through an input tax credit (ITC) and the QST through an input tax refund (ITR), to the extent the site is used in your commercial activities. Those taxes are then not part of your cost: the CRA asks you to subtract the ITC from the expense or from the capital cost, and the same logic applies to recovered QST. For a purchase of $100 or more, the invoice must include, among other things, the supplier's GST/HST number.

If you're not registered, you can't recover those taxes: the deductible expense, or the capital cost, includes the GST and QST you paid.

With foreign providers, one thing to watch: since July 2021, many non-resident digital businesses collect GST/HST under a simplified regime. If you're registered, give them your GST/HST number so they don't charge it: according to the CRA, you generally couldn't claim an ITC for that tax. Likewise, an out-of-Quebec supplier registered under the specified system must not collect QST if you provide your QST number (the one containing the letters TQ).

Personal use, a business not yet launched, friends and family, foreign currency: special cases

Mixed use. If the site also serves a personal project, only deduct the business portion: the law doesn't allow you to deduct personal or living expenses. Note how you calculated the percentage.

A business not yet launched. To deduct an expense, you must be carrying on a business in the fiscal period in which you incur it. According to the CRA, your business starts when you begin some significant activity: researching the idea isn't enough, buying the equipment or goods to start is. If you're still testing the idea, talk to your accountant before deducting the site.

Paying a friend or relative. That's allowed, but the expense must be reasonable in the circumstances: a price comparable to what another provider would charge, for work actually done. Ask for a real invoice and pay in a traceable way.

Foreign currency. Your amounts must be reported in Canadian dollars. The CRA's reference is the Bank of Canada rate on the day of the transaction, and it accepts other reliable rates used consistently. Keep the invoice and the card statement showing the amount charged in Canadian dollars.

Which records should you keep, and for how long?

The CRA requires you to keep your records and supporting documents for six years from the end of the last tax year they relate to. Revenu Québec applies the same period, and sometimes longer in the case of an objection or appeal. For a website, keep the contract, the invoices and proof of payment; an invoice broken down by item (design, hosting, maintenance) helps your accountant separate the capital portion from the current portion.

If you do your own books, a tool like FraTax, a Mac app for Canadian sole proprietors (I designed its website), tracks income, expenses, equipment and receipts, then gives you the T2125 amounts line by line, and the TP-80 amounts in Quebec. Your data stays on your Mac, and you then file the return yourself or with your accountant.

Deducting your website: a checklist

Before you fill in your return, go through this list:

• Separate recurring costs (hosting, domain, maintenance, subscriptions, advertising) from build or redesign costs.
• Deduct recurring costs in the year: lines 8521 and 9270 of the T2125, lines 200 and 246 of the TP-80-V.
• For the build or a redesign, decide with your accountant between a current expense and Class 12 (up to 100% in the first year if the site becomes available for use before 2030).
• New computer available for use before 2027: Class 50, with a 100% first-year deduction possible for the business portion.
• Registered for sales taxes: claim your ITCs and ITRs and deduct the amounts net of tax. Not registered: include the taxes in the cost.
• Give your GST and QST numbers to foreign providers.
• Keep invoices, contracts and proof of payment for at least six years.

Need a clear website, and a clear invoice?

At Kollowo, I build fast, bilingual websites for freelancers and small businesses in Quebec, with a quote that lists the site build and the yearly fee (domain, hosting and maintenance) separately. If you're planning your site, just write to me.