T2125 Form: Step-by-Step Guide for Self-Employed Canadians (2026)

What Is the T2125 Form?

Form T2125 — Statement of Business or Professional Activities — is the CRA form every self-employed Canadian uses to report business income and expenses. It is filed as part of your T1 personal tax return.

If you earn income as a freelancer, consultant, ride-share driver, delivery driver, contractor, or sole proprietor, you need a T2125. You file one T2125 for each distinct business activity.

Part 1: Business Identification

The first section asks for your business details. If you operate under your own name, enter your legal name as the business name.

You will need to provide a NAICS industry code. Here are the most common codes for self-employed Canadians:

If you are unsure, search for your activity on the Statistics Canada NAICS website.

Part 2: Business Income

This is where you report your gross revenue.

• Line 8000 — Gross business or professional fees. Enter your total income before any deductions.
• Line 8290 — Reserves, returns, and allowances.
• Line 8299 — Adjusted gross income (Line 8000 minus Line 8290).

Parts 3 Through 6: Cost of Goods and Total Income

Part 3: Cost of Goods Sold — Skip this section if you provide services rather than sell physical products. It applies to inventory-based businesses and e-commerce sellers.

Part 4: Gross Profit — Line 8299 minus cost of goods sold. For most service providers, gross profit equals gross income.

Part 5: Other Income — Report any grants, subsidies, or government assistance received in connection with your business.

Part 6: Total Income — Sum of gross profit and other income. This is Line 8230.

Part 7: Business Expenses

This is the largest and most important section. Every deductible business expense goes here, organized by CRA line number.

Part 8: Capital Cost Allowance

Capital Cost Allowance (CCA) is the CRA's depreciation system. Instead of deducting the full cost of an expensive asset in the year you buy it, you deduct a percentage each year based on the asset class.

Common CCA classes for self-employed Canadians:

Part 9: Motor Vehicle Expenses

If you use a personal vehicle for business, Part 9 is where you calculate the deductible amount.

Step 1: Total all vehicle expenses for the year — fuel, insurance, maintenance, repairs, licence, registration, lease payments, or loan interest.

Step 2: Determine your business-use percentage by dividing business kilometres by total kilometres driven.

Step 3: Multiply total vehicle expenses by the business-use percentage. The result is your deduction.

Key limits for 2026:

For a detailed breakdown of vehicle deductions specific to ride-share drivers, see our Uber driver tax deductions guide.

Part 10: Business-Use-of-Home Expenses

If you use part of your home regularly and exclusively for business, you can claim a portion of your housing costs.

Workspace Qualification

Your home office qualifies if it is either your principal place of business or a space used exclusively and regularly for meeting clients.

Calculating the Deduction

Measure the square footage of your workspace and divide it by the total square footage of your home. Apply that percentage to eligible housing costs:

• Rent (or mortgage interest — not principal)
• Property taxes
• Utilities (heat, electricity, water)
• Home insurance
• Maintenance and minor repairs

The Loss Restriction

Home office expenses cannot create a business loss. If your business income is $5,000 and your total home office deduction would be $6,000, you can only claim $5,000 this year. The remaining $1,000 carries forward to next year.

Part 11: Net Business Income

Line 9946 — Net income (or loss) from self-employment. This is calculated as total income (Part 6) minus total expenses (Parts 7 through 10).

This amount flows to your T1 personal tax return on Line 13500 (business income) or Line 13700 (professional income). It is subject to both income tax and CPP contributions.

Common T2125 Mistakes

Claiming 100% vehicle use without a logbook. CRA auditors look for this. Unless your vehicle is used exclusively for business, you need a logbook to support your business-use percentage.

Forgetting the industry code. Leaving the NAICS code blank can delay processing. Look up the correct code before filing.

Counting GST/HST collected as income. GST/HST you collect from customers is a liability to CRA, not revenue. Do not include it in Line 8000. Report it separately on your GST/HST return. See our GST/HST guide for details.

Not claiming CCA when eligible. Many self-employed Canadians miss the CCA deduction on their vehicle, computer, or equipment. It reduces your taxable income every year until the asset is fully depreciated.

Frequently Asked Questions

Do I need a T2125 if I have a part-time side hustle?

Yes. Any self-employment income must be reported on a T2125, regardless of the amount. Even a few hundred dollars from freelance work requires a T2125.

Can I file T2125 online?

Yes. Most tax software (TurboTax, Wealthsimple Tax, StudioTax) includes T2125 as part of the personal tax return. You can also file through CRA My Account using NETFILE-certified software.

What if I have multiple businesses?

File a separate T2125 for each distinct business activity. For example, if you drive for Uber and also do freelance consulting, you would file two T2125 forms with your T1 return.

How long should I keep my T2125 records?

CRA requires you to keep all supporting documents — receipts, invoices, bank statements, mileage logbooks — for six years after the tax year. Store them digitally or physically in a secure location.