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T2125 Explained: Reporting Self-Employment Income
Plan your expenses and deductions strategically each year
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Maintain accurate and organized financial records for easy reporting
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Talk to a tax professional for expert guidance
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Use accounting and tax software to make management easier
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If you earn self-employment income in Canada — freelance, contract, gig, or small business — you report it on Form T2125, filed as part of your personal T1 return. Here is what each part covers and the records the CRA expects.
What T2125 is
T2125, Statement of Business or Professional Activities, calculates your net business income: gross revenue minus eligible expenses. That net figure flows into your T1 and is taxed at your marginal rate. You are taxed on profit, not revenue — which is exactly why tracking expenses matters.
What you report
- Gross business or professional income, before expenses
- Eligible business expenses, organized by category
- Home office (Part 7) and vehicle (Chart A) costs — business-use portion only
- Your industry code and, for online activity, your business web addresses
Complete a separate T2125 for each distinct business activity.
Common deductible expense categories
| Category | What you can deduct |
|---|---|
| Home office | % of rent, utilities, and insurance based on workspace size |
| Vehicle | % of fuel, insurance, and maintenance by business km (logbook required) |
| Phone & internet | Business-use portion only |
| Advertising | Website, online ads, platform fees |
| Supplies & software | Tools used to deliver your work |
| Professional fees | Accounting and legal for business |
| Meals & entertainment | 50% of business-related amounts |
Home office and vehicle: where people slip
Both are calculated on a business-use percentage and both need documentation — a workspace measurement for home office, a mileage logbook for vehicle. The CRA disallows vehicle claims without a log.
Keep all records for six years. Contemporaneous records — kept as you go, not reconstructed in April — are your best defence in a review.
Deadlines
Self-employed individuals file by June 15, but any balance owing is still due April 30. Interest starts May 1 on unpaid amounts.
How Count myAccount helps
We map your income and expenses to the right T2125 categories, review for audit risk before filing, and e-file with the CRA.
