When you are Self-Employed you will claim all your expenses as well as any Capital Cost Allowance (CCA or depreciation) of assets on the T2125 - Statement of Business Activities.
Tools are considered to be "assets" and you claim CCA on them. This mean you do not get a full "expense" claim for them in the year you purchase them (or start using for business purposes). You will be able to claim a percentage of the cost over the lifetime of the asset.
- Tools which cost over $500 are Class 8 items, and depreciate at a rate of 20%.
- Tools costing less than $500 are Class 12 items, and depreciate at a rate of 100%. While it may seem like depreciating an item at 100% is the same as claiming the full amount as an expense, the reason for this is CCA is an optional claim. This means if you do not wish to claim the amount in the current year you can choose to claim it in the future when it is more beneficial to reducing your taxable business income.
- Any other small items that are "consumables" such as saw blades, drill bits, sanding blocks, (things that do not have a lasting value and must be replaced frequently) can be claimed as an expense under Supplies. (Line 8811)
To claim CCA, you must complete the CCA section of the T2125. Here's some more info from TurboTax about claiming CCA: https://bit.ly/2NUNalo
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