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🇨🇦 Canada

T2125 Self-Employment (Canada)

Report Self-Employment Income to CRA

Medium ~30 min TaxSelf-EmployedBusinessCanada

/ What is this form?

T2125 is Canada's equivalent of Schedule C — report all business or professional income and expenses from self-employment. Filed with your annual T1 return. You can deduct business expenses including home office, vehicle, supplies, and professional fees.

/ Who needs this form?

  • Self-employed individuals
  • Freelancers and contractors
  • Sole proprietors
  • Professionals (doctors, lawyers, accountants in private practice)

/ What you need before you start

Complete records of all business income
Receipts for all business expenses
Vehicle logbook (if claiming vehicle expenses)
Home office measurements and utility bills (if applicable)

/ Step-by-step guide

1 Record All Business Income
List every payment received during the tax year from your business or professional activities, before expenses.
2 Categorize Business Expenses
Organize deductible expenses: advertising, office supplies, professional fees, travel, vehicle costs, phone and internet (business portion), home office expenses.
3 Calculate Home Office Expenses
If you use part of your home exclusively for business, calculate the percentage and apply it to heat, hydro, rent, or mortgage interest.
4 Complete T2125
Fill in gross income, each expense category, and calculate net income. This flows to your T1 personal tax return as self-employment income.
5 Pay CPP Contributions
Self-employed individuals pay both the employee and employer portions of CPP on net self-employment income — currently 11.9% above the basic exemption.

/ Key fields explained

Field What to enter Common mistake
Gross business income Total revenue from all business activities before any deductions Report gross income first then deduct expenses — do not net them before entering
Business-use-of-home Percentage of home used exclusively for business (home office sq ft divided by total home sq ft) Must be a dedicated, exclusive workspace — a kitchen table or shared room does not qualify

/ Common mistakes to avoid

Not keeping receipts (CRA can audit up to 6 years back)
Claiming personal expenses as business expenses
Not making quarterly instalment payments when tax owing exceeds $3,000

/ Frequently asked questions

Do I need to charge GST/HST?

Only if your revenue exceeds $30,000 over any 4 consecutive quarters. Below that, registration is optional but you can voluntarily register to claim input tax credits.

Do I pay CPP as self-employed?

Yes. Self-employed people pay both employee and employer portions of CPP — currently 11.9% on net self-employment earnings above the basic exemption (~$3,500).