Salaries & Wages on Your T2125
Employee wages, CPP, EI, and benefits are deductible — but you can never deduct your own salary as a sole proprietor.
What You Can (and Can't) Deduct
Know exactly what belongs on Line 9060 — and what the CRA says doesn't qualify.
What Qualifies
- Gross salaries and wages paid to employees
- Employer CPP and EI contributions
- Workers' compensation premiums and employee benefits (health, dental)
Does NOT Qualify
- Your own salary or drawings as a sole proprietor
- Payments to independent contractors or subcontractors (may go on Line 8871 or be reported on T4A)
Rules & Limits
Special CRA rules and percentage limits that apply to salaries, wages & benefits.
Special Rules
Sole Proprietors Cannot Deduct Own Pay
Heads upAs a sole proprietor, you cannot deduct your own salary, wages, or drawings. Your business income after expenses IS your income. Only amounts paid to employees are deductible.
Reasonableness Test for Family Members
Heads upIf you employ family members, the wages must be reasonable for the work performed. The CRA may disallow deductions for inflated wages paid to family members who do little or no actual work.
Section 67 of the Income Tax ActReal-World Examples
See how different professionals use Line 9060 deductions in practice.
Part-Time Labourer Wages
Hired a part-time labourer to assist with framing and drywall work on residential projects.
$18,000
$18,000 (100%)
Part-Time Packer/Shipper
Employed a part-time worker to pack and ship online orders from the home warehouse.
$8,400
$8,400 (100%)
Common Mistakes to Avoid
These errors on Line 9060 can trigger a CRA review — here's how to get it right.
Trying to deduct own salary as a sole proprietor
Sole proprietors cannot deduct their own salary, wages, or draws. Your net business income after all other expenses is your taxable income.
Paying family members unreasonable amounts
Wages paid to family members must be reasonable for the work actually performed. The CRA can disallow deductions if the amount is excessive relative to the duties.
Commonly Confused Categories
These categories are often mixed up with Salaries, Wages & Benefits. Here's the difference.
Sample Receipt Walkthrough
See how ScanForTax processes a typical salaries expense.
Internal Payroll Record
2025-03-31
Ontario
How ScanForTax categorizes this
ScanForTax records this payroll entry and auto-categorizes it under Salaries, Wages & Benefits (Line 9060). The total includes gross pay plus employer-side CPP and EI contributions. No HST applies to payroll.
Frequently Asked Questions
Can I deduct my own salary as a sole proprietor?
Can I pay my spouse or child and deduct the wages?
Related Professions
Profession-specific guides that frequently use Salaries deductions.
Tax Guides by Province
See how tax recovery works for salaries expenses in each province.
Related Expense Categories
Tax deadline is April 30th.
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