Business income tax

Overview

If you are self-employed, an unincorporated business or in a partnership, you must report your personal income.

You must also report any income you make from any activity meant to make a profit, such as:

• driving services
• home renovations and repairs
• lawn care services
• cleaning services
• renting space in your home
• selling homemade goods

If you fail to report all of your income you may be charged a 10% penalty on the total amount of income you didn’t report.

Business income

Use the Canada Revenue Agency (CRA) Guide T4002 to help you calculate what business or professional income to report on your tax return.

If you have more than one business or job you’ll need to file a Statement of Business or Professional Activities Form T2125 for each of your businesses or jobs, along with your regular tax return.

Make sure to:

• keep separate records for all of your sources of income

• have original documents like sales invoices, cash register tapes, receipts, fee statements and contracts
• keep all of your supporting documents, the CRA may ask to see them again in the future

Business expenses

Expenses are paid to earn business income and include things such as:

• management and administration fees
• office expenses
• supplies
• legal, accounting and other professional fees

When filing your tax return, you can deduct business expenses to bring your taxable income down.

Make sure to keep copies of sales invoices or receipts.

Home office expenses

If you operate your business from home or part of your home, you can deduct expenses to bring your taxable income down such as:

• property taxes, mortgage interest and capital cost allowance
• home maintenance costs such as:
  • heating
  • home insurance
  • electricity
  • cleaning materials

Learn more about deducting home office expenses through the CRA.

Business tax return form

Visit the Canada Revenue Agency to get tax return forms and publications for your business.