How to Complete Form T2125: Statement of Business or Professional Activities

Form T2125, Statement of Business or Professional Activities, is the form a self-employed person files with their personal return to report business or professional income and expenses. This guide follows the form part by part using the CRA’s Guide T4002 (Self-employed Business, Professional, Commission, Farming, and Fishing Income) and the CRA’s Form T2125 page. It is part of the self-employment taxes hub; first year self-employed covers registering, deadlines and instalments, and the self-employed tax deductions guide covers which expenses count.

Who uses T2125

You fill in a T2125 for business, professional or commission income earned as a self-employed person, including a share of a partnership’s income. The guide’s Part 3A list includes income 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. If you have both business and professional income, or two or more businesses or professional activities, you complete a separate form for each.

Some income goes elsewhere: rental income from a property where you provide only basic services is reported using Guide T4036, Rental Income (the rental income guide covers it), and farming and fishing income have their own forms (T2042 and T2121).

Reporting method and fiscal period. From Guide T4002:

• Farmers, fishers and self-employed commission agents can use the cash method or the accrual method.
• All other self-employment income must be reported using the accrual method.
• Under the accrual method, you report income in the fiscal period you earn it, no matter when you receive it, and deduct expenses in the fiscal period you incur them, whether or not you pay them in that period.
• Under the cash method, you report income in the fiscal period you receive it and deduct expenses in the fiscal period you pay them.
• Under the accrual method, the value of your inventory forms part of the income calculation; you list and count it at the end of the fiscal period.
• Changing from the cash method to the accrual method needs permission from your tax services office, asked for in writing before your return is due.
• Self-employed individuals generally have to use a December 31 year-end; an eligible individual may be able to use another method that allows a fiscal period ending on another date, reconciled on Form T1139.
• A fiscal period can't be longer than 12 months, but it can be shorter, such as when a business starts or stops.

How the form is laid out

Part 1: identification

Enter the fiscal period your business year covered, your program account number if the CRA assigned one, and an industry code. If more than 50% of your business involves one specific activity, choose the code for that main activity; if none does, choose the appropriate higher-level code. Paper filers use the North American Industry Classification System (NAICS) list; electronic filers use the codes in their tax software. Partners enter their percentage of the partnership and the partnership’s business number from the T5013 slip.

Part 2: internet business activities

This part asks whether you earn income from web pages or websites: selling on your own site, taking orders through it, selling on online marketplaces or auction sites run by others, or earning from advertising or affiliate programs on your site. Enter the number of pages and sites, their addresses (the five that generate the most if you have more), and an estimate of the percentage of income they generate. A profile page on a marketplace or directory that earns income counts.

Part 3: income

If you use the GST/HST quick method, amounts 3D to 3F (or 3K to 3M for professionals) add back the difference between the GST/HST you collected and what you remit; see the GST/HST guide for freelancers. A service business with no inventory leaves Part 3D blank.

Part 4: expenses

Only the business part of an expense goes on the form. As a rule, you can deduct any reasonable current expense you incur to earn income; the cost of capital property is claimed as CCA instead (Guide T4002 has a chart of tests for telling a current expense from a capital one). The deductible amount includes GST/HST you paid, less any input tax credit you claim for it.

Meals and entertainment. Line 8523 is limited to part of what you spend; the self-employed tax deductions guide explains the limit and its exceptions.

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. A passenger vehicle bought in 2026 that cost more than $39,000 before tax goes in Class 10.1, and its capital cost for CCA is limited to that amount plus the GST/HST and PST on it; a zero-emission passenger vehicle in Class 54 has its own, higher ceiling ($61,000 for 2026). Chart B limits the deductible interest on a loan for a passenger vehicle ($350 a month for loans taken out in 2026). The vehicle expenses guide covers the logbook and Chart A.

Not deductible. Guide T4002 lists salary or drawings paid to yourself or a partner, goods or services you or your family used, donations and political contributions, interest and penalties on your income tax, most life insurance premiums, the non-business part of any expense and most fines and penalties.

Part 5: your net income

Partners enter their share of line 9369 and the amounts the partnership didn’t reimburse them for (line 9943). Then two lines matter to most sole proprietors:

• Line 9945, business-use-of-home expenses. 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 home part of costs such as rent, utilities, home insurance and property taxes goes here, not on the Part 4 lines. See business-use-of-home expenses.
• Line 9946, your net income (loss). This goes on line 13500 (business income), 13700 (professional income) or 13900 (commission income) of your return; a loss is entered in brackets.

A business loss. A loss from a business other than farming or fishing reduces your other income for the year. If it is more than your other income, the remainder is a non-capital loss. Guide T4002 lets you apply a non-capital loss to income of up to 3 earlier years, requested on Form T1A, or of up to 20 later years. Self-employment losses don’t reduce CPP contributions on employment earnings.

Capital cost allowance (Area A)

Capital property such as furniture, computers, equipment and vehicles is grouped into classes, each with its own rate, and deducted over time on the declining balance: the rate applies to the class’s remaining balance, the undepreciated capital cost (UCC), which shrinks each year you claim. The rates for common classes, from the CRA’s classes of depreciable property page:

How Area A works, per Guide T4002:

• For each class, start with the UCC at the end of last year (the closing UCC column of last year’s form), add the cost of additions in the year and subtract the proceeds of dispositions.
• The half-year rule limits the CCA in the year you acquire a property to one-half of your net additions to a class. It does not apply to accelerated investment incentive property (acquired after November 20, 2018 and before 2025, available for use before 2028) or reaccelerated investment incentive property (acquired after 2024, available for use before 2034), which get a larger first-year claim, or to zero-emission vehicles, which have their own first-year rates; some classes have a 100% first year; small business tax deductions sets out these rules. Immediate expensing applied only to property that became available for use before 2025 (before January 1, 2024 for a Canadian-controlled private corporation).
• A first fiscal period shorter than a full year reduces the claim in proportion to the days in the period.
• You don’t have to claim the maximum; you can claim any amount from zero to the maximum, and what you don’t claim stays in the UCC for later years.
• Include only the business part of a property used partly for personal purposes.
• If the balance in column 7 (UCC after additions and dispositions) is negative, you have a recapture of CCA that goes into income. If it is positive and no property is left in the class at the end of the fiscal period, you may have a terminal loss. The recapture and terminal loss rules don’t apply to passenger vehicles in Class 10.1 (unless they are designated immediate expensing property).

Worked example: a freelance designer

Related guides

• Self-employment taxes hub
• First year self-employed: what to register, file and pay
• Self-employed tax deductions
• Business-use-of-home expenses for the self-employed
• Vehicle expenses for the self-employed
• GST/HST on freelance income
• Self-employed tax calculator