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Side Hustle Taxes in Canada: Reporting Extra Income Alongside a Job

Updated

A side hustle is extra income you earn on top of a job: freelancing in the evenings, selling online, delivering for an app, tutoring. If it is a business, you report it on your own tax return, the profit is added to your salary, and nothing is withheld from it. This page covers what is different when a business sits alongside employment. It is part of the self-employment taxes hub; first year self-employed covers deadlines and instalments in full, and the side hustle tax calculator estimates the extra tax.

When a side hustle is a business

Guide T4002 defines a business as “an activity that you intend to carry on for profit and there is evidence to support that intention”. Its list of business income includes earnings from sharing-economy activities such as ridesharing and accommodation sharing, gig-economy activities, peer-to-peer sales on online platforms and social media influencer activities, including money and non-money gifts an influencer receives in the course of the business.

Platforms report too. Under the Reporting Rules for Digital Platform Operators in Part XX of the Income Tax Act, platforms that let sellers sell goods or provide services such as rentals, rideshare and delivery report each reportable seller's identity and earnings to the CRA every year, starting with the 2024 calendar year, and give the seller a copy by January 31 of the following year. A seller with fewer than 30 sales of goods totalling $2,800 or less in the year isn't reported. Being reported, or not, doesn't change the seller's own tax obligations. The gig worker taxes guide has the rules in full.

Income from your job is not part of the business: employment income stays on your T4, and expenses of the job (for example a home office your employer requires) follow the separate employee rules in the work-from-home deduction guide.

How the side income is taxed

You report the business on Form T2125, Statement of Business or Professional Activities, filed with your return; the T2125 guide walks through it. The net income from the form (line 9946) goes on line 13500 of your return and is added to your employment income. Because tax rates rise with income, the side profit is taxed at the combined federal and provincial rate that applies on top of your salary, your marginal tax rate.

For 2026, the federal basic personal amount is $16,452, a non-refundable credit at the lowest rate (14%); it is reduced gradually for net income above $181,440, down to $14,829 at $258,482 and above. Each province and territory has its own basic personal amount. It applies once, to your total income, so if your salary is above it, it is already used up before any side income is counted.

Two things differ from your job:

  • No withholding. Income tax can’t be withheld from self-employment income. Unless you plan for it, the tax on the side profit shows up as a balance owing when you file.
  • Reporting method and year-end. Farmers, fishers and self-employed commission agents can report income using the cash method or the accrual method; all other self-employment income must be reported using the accrual method, which counts income in the fiscal period you earn it, no matter when you are paid, and expenses in the period you incur them, whether or not you pay them then. Self-employed individuals generally have to use a December 31 year-end, and a fiscal period can't be longer than 12 months. So income goes in the year you earn it, even if the client pays the next year.

CPP on side income

Self-employed people pay both the employee and the employer share of CPP contributions on their net business income (11.90% above the basic exemption up to the first earnings ceiling, plus 8% CPP2 between the first and second ceilings), worked out on Schedule 8 and paid with the income tax return. A non-refundable tax credit is claimed on half of the base contributions, and the other half, the first additional contributions and all CPP2 contributions are deducted from income. If you also have a job, the CPP you have to pay on self-employment income depends on how much you already contributed as an employee (boxes 16, 16A, 17 and 17A of your T4 slips): contributions apply only to earnings between the basic exemption and the yearly earnings ceilings, so once your employment earnings reach a ceiling, nothing more up to that ceiling is due on the side income. Self-employment or partnership losses can't reduce the CPP contributions paid on your employment earnings. For 2026, the ceilings are pensionable earnings of $74,600 for CPP and $85,000 for CPP2. The side hustle tax calculator works through the numbers with a job, and the self-employed tax calculator without one. Self-employed residents of Quebec contribute to the QPP through their Revenu Québec return instead.

Paying the tax on time

If you are self-employed, or the spouse or common-law partner of someone who is and you lived together at any time in the year, your return for a tax year is due by June 15 of the following year, unless your business expenditures are mainly the cost or capital cost of tax shelter investments (then it is due by April 30); any balance owing is still due by April 30, and paying by then avoids interest and penalties. Two ways to spread the cost:

  • Extra tax from your pay. Form TD1 has an “Additional tax to be deducted” line: you enter an extra amount you want deducted from each pay, and you can file a new TD1 to change it later.
  • Instalments. If the side income leaves you with a balance owing year after year, the CRA may require quarterly instalments: You have to pay income tax by instalments for a year if your net tax owing is more than $3,000 ($1,800 if you live in Quebec on December 31) for that year and was also more than that in either of the two previous years. Instalments are due March 15, June 15, September 15 and December 15; if your main source of income is self-employment income from farming or fishing, there is one instalment due date, December 31. First year self-employed covers the reminders, payment options and interest.

Deductible expenses

As a rule you can deduct any reasonable current expense you incur to earn the business income, and only the business part of an expense that is partly personal. The self-employed tax deductions guide lists them. Examples for a side business are supplies, platform and payment-processing fees, advertising, professional fees, the business part of a phone plan, and:

  • A workspace at home. A self-employed person can deduct business-use-of-home expenses only if the workspace is their principal place of business, or they use it only to earn business income and on a regular and ongoing basis to meet clients, customers or patients. Only the business part of costs such as heat, electricity, insurance, property taxes, mortgage interest and capital cost allowance is deductible, worked out on a reasonable basis such as the workspace's share of the home's area. The deduction can't be more than the business's net income before it, so it can't create or increase a business loss; any amount not deducted carries forward to the next fiscal period. The limit on creating a loss matters for a small side business. See business-use-of-home expenses.
  • A vehicle. When a vehicle is used for both business and personal driving, only the business share of its costs (such as fuel, insurance, licence, maintenance, loan interest, leasing and capital cost allowance) is deductible, worked out from a record of total and business kilometres; the expenses have to be reasonable and backed by receipts, business parking and supplementary business insurance are deductible in full, and passenger vehicles have limits on capital cost allowance, interest and leasing costs. See vehicle expenses.
  • Equipment. A computer, camera or tools are capital property, deducted as capital cost allowance rather than as an expense. A camera (Class 8) is claimed over several years. A computer acquired after April 15, 2024 that becomes available for use before 2027 can be deducted in full (100%) in the first year under the Income Tax Regulations. Most small tools costing less than $500 go in Class 12, at 100%, and are fully deductible in the year you buy them.

A side business with $20,000 of revenue for the year and these business expenses:

ItemAmount
Revenue$20,000
Supplies$500
Software subscriptions$300
Business part of phone and internet$400
Vehicle: $8,000 of costs × 5,000 business km ÷ 20,000 total km$2,000
Total expenses$3,200
Net income added to your other income (line 13500)$16,800

GST/HST

You have to register for the GST/HST once you make taxable sales in Canada and are no longer a small supplier: that happens when your taxable sales go over $30,000 in a single calendar quarter (register from that sale) or over the last 4 consecutive calendar quarters (by the end of the month after that quarter); below that you can register voluntarily. The count includes taxable sales from all your businesses. Ride-sharing is the exception: A self-employed driver who provides commercial ride-sharing is treated as a taxi business for GST/HST: they must register and charge GST/HST on fares from their first ride, even below the $30,000 small-supplier threshold. Delivering food or groceries is not ride-sharing, so the usual small-supplier rule applies to it. Registering voluntarily lets you claim input tax credits on GST/HST you pay on business purchases, but you then charge it on your taxable sales. The GST/HST guide for freelancers covers both.

Records

The CRA says to keep your records for six years from the end of the last tax year they relate to (unless it lets you destroy them earlier), at your Canadian residence or place of business unless it allows another place; you are responsible for them even when a bookkeeper or accountant keeps them, and you must make them available to the CRA on request. Guide T4002 adds that income records must show the date, amount and source of the income, and the CRA may disallow expenses you can’t support. A separate bank account for the business makes the two easier to tell apart.

Before you start: EI, your job and a business name

  • If you’re receiving EI. Your EI reports ask for the hours and earnings from each job, including self-employment. You keep 50 cents of EI for every dollar you earn, up to 90% of the weekly insurable earnings your benefit is based on; above that, earnings are deducted dollar for dollar, and a full week of work pays no EI. See how much you can earn on EI and self-employed while on EI.
  • EI for your own business. Self-employed people can register for EI special benefits (maternity, parental, sickness and caregiving), but must wait 12 months after registering before they can claim. Quebec residents get maternity, paternity, parental and adoption benefits from the Québec Parental Insurance Plan instead; the other EI special benefits, such as sickness, still come from EI.
  • A business name. As a sole proprietor you can work under your own name, register a business name, or both. If the business uses a name other than yours, the CRA says you’ll need a separate bank account to deposit cheques made out to it. Starting a business covers registering the name.

Checklist

  • Income and expenses recorded from the first sale, in a separate bank account (records)
  • Sales from all your businesses tracked against the $30,000 GST/HST threshold (GST/HST)
  • Money set aside for tax and CPP, or extra tax deducted from your pay (paying the tax)
  • Receipts kept, and a logbook if you’ll claim a vehicle (deductible expenses)
  • EI reports and your employment contract checked
  • A business name chosen, or your own name

Platform guides

Sources

The figures and rules on this page come from these sources, last checked against them between September 5, 2026 and October 1, 2026. How we check facts.