The T2125, or Statement of Business or Professional Activities, is the Canada Revenue Agency (CRA) form self-employed Canadians use to report business or professional income and the expenses they incurred to earn it. If you are self-employed earning business, professional, or commission income, you will use this form to declare the income earned in your business, as well as expenses incurred to earn that income. The six-page document has various sections, but here are some of the key areas to note:
Section | Meaning |
|---|---|
| Identification and Partnership Information | These are two separate sections that require your personal information, including business name and number, social insurance number, address, your name, CRA business number (GST/HST), and more. You can leave some parts blank if you don't have a registered business. The partnership information tab only appears if you indicate the business is a partnership, rather than a sole proprietorship. |
| Income and Expenses | Use this section to report your income and expenses. You are required to keep records for your income and expenses, but you might not have these if you didn't realize you were running a business. If you don't have good records, you should be conservative in your estimates for income and only claim expenses that you can back up with receipts (credit card statements aren't enough). |
| Capital Cost Allowance (CCA) | Use this section to report your capital expenses. Capital expenses are expenditures for things that have a lasting benefit (like office furniture, a computer, or a camera). If you have a personal motor vehicle, don't include it on the CCA tab; use the Motor Vehicle Expenses (your own vehicle) tab to claim both motor vehicle expenses and CCA for your vehicle. |
| Business use-of-home expenses | If you work from home, you can use this section to claim expenses related to your home. You can deduct use-of-home expenses if your home is your principal place of business or if you use the space to earn your business income and you use it on a regular and ongoing basis to meet your clients, customers, or patients. |
| Motor vehicle expenses | Use this tab to claim the cost of your car if you use it for your business. If you didn't keep a detailed logbook and receipts, you might not want to claim this amount. The CRA is known to often request records for motor vehicle claims. Here's more information from the CRA on how to complete this section. |
| Other | Use this section to provide further information about your self-employment businesses. You can add your tax shelter number where applicable, T1139 information, liabilities, capital contributions, and different balance sheet details. You can also add website information if you have a site that earns you income. |
You can find a more detailed list of deductible expenses on the CRA website here.
If you have more than one business, complete a T2125 form for each business.
Who needs to file a T2125?
If you're self-employed in Canada, this form is for you — whether self-employment is your main source of income or a side pursuit. You don't need a registered business or a business number to file it.
Sole proprietors who run an unincorporated business on their own.
Partners who share a business with one or more people.
Freelancers and contractors who are paid for their services.
Gig workers who earn income through apps or short-term jobs.
Commission earners who are paid based on sales or results.
You can be employed and self-employed at the same time. In that case, you report your employment income from your T4 slip as usual and use the T2125 for the self-employment portion. If you run more than one business, complete a separate T2125 for each one.
Business income vs. professional income
The form asks you to identify which type of income applies to you. The difference comes down to how you earn it and how you account for it.
Business income comes from sales, commissions, or fees, and you account for inventory at the start and end of your fiscal period — think retailers, trades, and online sellers.
Professional income comes from work as a member of a profession with a governing body, such as a lawyer, accountant, engineer, or doctor, and you account for work-in-progress.
Both differ from employment income, which is reported on a T4 slip. When you're self-employed, no tax is withheld from what you earn, so you report that income yourself.
Which expenses can you claim on the T2125?
You can deduct reasonable expenses you paid to earn your income, which lowers your taxable net income. Keep your receipts, because the CRA can ask to see them.
Advertising and promotion to attract customers or clients.
Office and supplies used to run your business.
Professional fees for legal, accounting, or consulting help.
Business-use-of-home expenses when you work from home.
Motor vehicle expenses, if you keep a logbook.
Capital cost allowance (CCA) for assets with a lasting benefit.
You also need to register for and collect goods and services tax / harmonized sales tax (GST/HST) once you stop being a small supplier. That happens when your total taxable revenue (including that of any associated businesses) passes $30,000 in a single calendar quarter or over the last four consecutive calendar quarters.
NETFILing and mailing form T2125
You fill out the T2125 as part of filing your tax return, and how you submit it depends on how you file:
Tax software: the T2125 information is included when you submit your return via NETFILE.
A tax preparer or accountant: they include it when they submit your return via EFILE.
By mail: print your return, include a copy of the form, and send it with your income tax and benefit return; where you mail it depends on where you live in Canada, so check the CRA website for your mailing office.
Filing online is the easier and faster option.
If you or your spouse or common-law partner have self-employment income, the deadline to file your income tax return, with the T2125 Statement of Business or Professional Activities included, is June 15 of the year following the income tax year. If you have an amount owing on your tax return — and often those with self-employment income do because they don't have income tax withheld from the income they earn throughout the year — the payment deadline is April 30.
