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Can Canadian Freelancers Deduct PayPal, Stripe, and Platform Fees on the T2125?

2026-06-30 · 6 min read

The Small Fees That Quietly Reduce Your Income


If you get paid through PayPal, Stripe, Square, Shopify, Etsy, Upwork, Fiverr, or another platform, your client may pay one amount while a smaller amount lands in your bank account. The difference is usually a payment processing fee, marketplace commission, currency conversion charge, or platform service fee.


Canadian freelancers often ask: can I deduct those fees on my T2125? In most cases, yes. They are business costs incurred to earn income, as long as they relate to your self-employed work and you keep records.


Report the Gross Income, Then Claim the Fee


The cleanest approach is to record the full sale as income and record the platform fee as a separate expense.


Example:


  • A client pays $1,000 through Stripe
  • Stripe keeps $29.30 in processing fees
  • $970.70 is deposited to your bank account

    • For your records, show $1,000 of business income and $29.30 of business expense. If you only record the $970.70 deposit, your revenue reports may not match invoices, platform statements, or GST/HST records.


    Where Do Payment Fees Go on the T2125?


    The exact category can depend on your tax software and the nature of the fee, but many payment and merchant charges fit under Line 8871 — Management and administration fees. The CRA specifically discusses bank charges, including charges for processing payments, in that area of the T2125 guidance.


    Some related costs may belong elsewhere:


  • Business bank account fees may be treated as bank or administration charges
  • Interest on a business loan or credit card is usually separate from processing fees
  • Advertising or promoted listing fees may fit advertising instead of payment processing
  • Professional marketplace subscriptions may be treated like dues, software, or administration depending on what you bought

    • The main goal is to be reasonable, consistent, and able to explain the business purpose.


    What About Upwork, Fiverr, Etsy, or Shopify Fees?


    Marketplace fees are usually deductible when they are charged so you can sell your services or products. Track them separately from the cash you receive.


    For example, if Upwork shows a client payment, a service fee, and a net withdrawal, save the statement showing each line. If Etsy or Shopify charges listing, transaction, payment, or subscription fees, export the monthly report instead of relying only on bank deposits.


    GST/HST and Foreign Currency Caution


    If you are registered for GST/HST, make sure your income, fees, and input tax credits are handled consistently. Do not double-count tax you already recover as an ITC.


    Foreign platforms add another wrinkle. A U.S. dollar PayPal or Stripe fee should be converted to Canadian dollars using a reasonable exchange rate method. Use the same approach throughout the year and keep the original platform report.


    Records to Keep


    Good proof is simple:


  • Monthly PayPal, Stripe, Square, Shopify, Etsy, or marketplace statements
  • Invoices showing the gross amount charged to clients
  • Bank deposits that reconcile to platform withdrawals
  • Notes for unusual refunds, chargebacks, or currency conversions
  • A year-end total by T2125 category

    • Track Fees Before They Disappear


    Payment fees are easy to miss because you never physically pay them; the platform removes them before you see the deposit. ClaimHero helps Canadian sole proprietors log these fees by T2125 category, add notes, and export clean totals for tax time. That turns dozens of tiny charges into one organized deduction.


    Track your T2125 expenses year-round with ClaimHero — free to start.