Form T2125 for Canadian freelancers: Statement of Business or Professional Activities

If you earn self-employment income as a sole proprietor (or a partner reporting your share), Form T2125 is where you work out business or professional income and expenses for your federal income tax return. Here's who uses it, how business and professional income are split, what the parts cover, the Part 4 expense list, home office and vehicle notes, CCA at a high level, and how it ties to GST/HST and your free record-keeping tools.

Checked against CRA pages, Guide T4002(E) Rev. 25, and the Form T2125 E (25) PDF on 2026-10-13. The form and guide still online then were the 2025 tax-year edition. Not written by a tax professional.

The short answer

• Form T2125 (Statement of Business or Professional Activities) is how you calculate self-employment business or professional income and expenses for your return (Completing Form T2125; Form T2125).
• Use a separate Form T2125 for each business or professional activity — and separate forms if you have both business and professional income (Completing Form T2125; Guide T4002, Chapter 2).
• Line 8299 is gross business or professional income. Report it on your return (business line 13499, professional line 13699) (T4002, Line 8299).
• Part 4 has labelled expense lines. Enter only the business part; home-office costs go through Part 7 onto line 9945, not mixed into the other lines (Expenses section; Business-use-of-home expenses).
• Line 9946 is your net income (loss) after line 9945. Report it on the matching return line (business 13500, professional 13700, commission 13900) (Form T2125 E (25) PDF).

1. Who files Form T2125

The CRA encourages you to use Form T2125 to report business or professional income and expenses (other financial statements are also accepted). It also covers self-employed commission sales (Report business income and expenses).

• Guide T4002 is for you if you earned income as a sole proprietor who is a business person, a professional, or a commission salesperson (not an employee who earns commission), or as a member of certain partnerships (Find out if this guide is for you).
• Self-employed vs employee: you are generally considered self-employed if you have a business relationship with a payer and you have the right to determine where, when and how your work is done (T4002).
• A business is an activity you intend to carry on for profit, with evidence to support that intention. In the guide, professional activities are treated as a separate business category for reporting (T4002, Chapter 1).
• Not this form: farming uses Form T2042; fishing uses Form T2121 (T4002, Chapter 2).

2. The parts of the form

The 2025 Form T2125 E (25) PDF is organised as (Form T2125 E (25)):

• Part 1 — Identification: name, business details, fiscal period, industry code, accounting method (cash is for commission only on this form).
• Part 2 — Internet business activities: how many sites earn income, and up to five main addresses.
• Part 3 — Income: 3A business, 3B professional, 3C gross (line 8299), 3D cost of goods sold when that applies.
• Part 4 — Net income (loss) before adjustments: the expense lines, total expenses, line 9369.
• Part 5 — Your net income (loss): adjustments, then business-use-of-home on line 9945, net on line 9946.
• Part 7 — Calculating business-use-of-home expenses: the worksheet that feeds line 9945.
• Other parts: Part 6 (other amounts for partners), Part 8 (other partners), Part 9 (equity), plus Chart A for motor vehicles.

3. Business vs professional income

Fill in Part 3A only for business income, or Part 3B only for professional income. If you have both, complete a separate Form T2125 for each (T4002, Part 3; Completing Form T2125).

• Professional activities are business activities under the law, but the form and guide keep them in separate parts because some professional rules differ (T4002, Part 3B).
• Self-employed commission income is treated as business income and included in Part 3A (T4002, Chapter 2).
• Line 8299 is gross business or professional income (adjusted gross sales or adjusted professional fees, plus certain other amounts). Enter it on the form and on your return as noted above (T4002, Line 8299).

4. Part 4: expense categories

Generally you can deduct reasonable current expenses you incur to earn business income. Enter only the business part. Include GST/HST you incur on those expenses, minus any input tax credit you claimed. You cannot claim the cost of buying capital property as a Part 4 current expense — that goes through CCA (Expenses section of Form T2125; T4002, Chapter 3).

Whether a particular cost is deductible, and how much, depends on the Income Tax Act and Guide T4002 for that line — this table is only the form's labels. Line 9369 is the net before Part 5 adjustments (Expenses section).

5. Motor vehicle expenses

Line 9281 is for motor vehicle expenses (not including CCA). Chart A on the form uses total kilometres and business kilometres for the period (Form T2125 E (25); T4002, Line 9281).

• Keep a record of each business trip (date, destination, purpose, kilometres) and odometer readings at the start and end of the fiscal period (Motor vehicle records).
• You can deduct motor vehicle expenses only when they are reasonable and you have receipts to support them (Motor vehicle records).
• Our free Canada vehicle and mileage logbook keeps that trip log in your browser and shows the business-use percentage Chart A needs.

6. Business use of your home

You can deduct expenses for a workspace in your home if it is your principal place of business, or you use the space only to earn business income and use it on a regular and ongoing basis to meet clients, customers, or patients (Business-use-of-home expenses).

• Work out the allowable amount in Part 7, then claim it on line 9945. Do not claim those same costs elsewhere on Form T2125 (Business-use-of-home expenses).
• The amount you can deduct cannot be more than your net income from the business before these expenses — you cannot use them to create or increase a business loss. Unused amounts may carry forward (Business-use-of-home expenses).
• Use a reasonable basis (for example, workspace area ÷ total home area). The CRA publishes a worked Part 7 example.

7. Capital cost allowance (high level)

Buying capital property (equipment, furniture, a computer) is not a Part 4 current expense. As a rule you claim capital cost allowance (CCA) instead, and enter the business part on line 9936 (Expenses section; T4002, Chapter 3; T4002, Chapter 4).

• Guide T4002 Chapter 4 explains classes, rates, and how much CCA you can claim. This page does not list class rates or decide which class something belongs in.
• CCA for business-use-of-home is handled in Part 7, not mixed into the Part 4 CCA line for other property (Form T2125 E (25)).

8. Net income, GST/HST and instalments

Line 9946 is your net income (loss) after home-office expenses. Report it on the matching line of your income tax and benefit return (Form T2125 E (25)).

• GST/HST is separate from Form T2125, but Guide T4002 reminds self-employed people about registration when worldwide taxable supplies (with associates) go over the small-supplier threshold, and our free GST/HST set-aside guide walks through registering, rates and returns (T4002, GST/HST).
• If you claim an ITC for GST/HST on a purchase, the deductible expense is reduced by that credit (Expenses section).
• Self-employed people may also pay income tax instalments. Our free CRA tax instalment checker covers who pays and when. Net self-employment income also feeds self-employed CPP.

9. Records that make the form fillable

Form T2125 is easier when your records already look like its lines:

• Income: invoices, payment confirmations, and a clear total that ties to line 8299.
• Expenses: receipts tagged to a Part 4 category (or 9270 other), with the business purpose noted; GST/HST and any ITC kept straight.
• Vehicle: trip log and odometer readings ready for Chart A / line 9281.
• Home office: square footage (or another reasonable basis) and the Part 7 expense list, kept out of the other Part 4 lines.

Generally keep required records and supporting documents for 6 years from the end of the last tax year they relate to (Keeping records; T4002, Business records).

Keeping those records

Free tools on this site that map onto Form T2125 habits (they run in your browser; nothing is sent or saved):

• Free invoice generator and GST/HST invoice requirements — what to show so clients can claim ITCs.
• Free expense and receipt log — purchases and GST/HST paid, with optional T2125 line hints.
• Canada mileage logbook — trips and business-use % for Chart A.
• Tax set-aside calculator, instalment checker, self-employed CPP calculator, GST/HST overview.

For a running spreadsheet of invoices, payments and expenses you can align to T2125-style categories at year end (including Canada tabs), our paid Freelance Billing Kit by Small Rows (US$12, one-time) is built for freelancers who bill in any currency. It doesn't file your return or suggest a tax rate.

Where the sources differ

We read the pages under Sources on 2026-10-13. A few details to watch:

• The form and guide online are still the 2025 edition. The form page links T2125 E (25) / t2125-25e.pdf; the guide table of contents still says T4002(E) Rev. 25. When the CRA publishes the next year's Form T2125, re-check line labels before you file.
• Gross vs net return lines differ. Line 8299 points at return lines 13499 / 13699; line 9946 points at 13500 / 13700 / 13900. Use the note printed on the edition you file.
• Expense-list order on the web page vs the PDF. The CRA expenses page lists line 9270 after 9936; the PDF still prints 9270 among the Part 4 lines. Labels match; follow the form you file.

When to talk to a tax professional

• you're unsure whether the activity is a business or whether you're an employee;
• you have inventory, employees, a home-office claim, vehicle CCA, or large equipment purchases;
• you have both business and professional income, or more than one activity;
• you live in Quebec or have provincial tax questions outside federal CRA pages;
• you received a CRA notice, or you're unsure which industry code or fiscal period to use.

Related free resources

• GST/HST and setting money aside for taxes — small-supplier rule, registering, rates and returns.
• What to put on a freelance invoice in Canada — GST/HST invoice / ITC information tiers.
• Freelance tax set-aside calculator (Canada) — GST/HST and income tax from each invoice.
• CRA tax instalments — who pays quarterly, due dates and a free checker.
• Canada self-employed CPP calculator — CPP on your net self-employment income.
• Free expense and receipt log and Canada mileage logbook.
• Schedule C for US freelancers and UK Self Assessment for freelancers, if you also file there.
• All free tools.

Sources

CRA pages, Guide T4002 and the Form T2125 PDF, read on 2026-10-13. Check the live page before you rely on it.

• Form: Form T2125 · Form T2125 E (25), PDF · Completing Form T2125 · Report business income and expenses
• Guide T4002: Guide T4002 · Table of contents · Who this guide is for · Chapter 1 · Chapter 2 – Income · Chapter 3 – Expenses · Chapter 4 – CCA
• Expenses / home / vehicle / records: Expenses section of Form T2125 · Business-use-of-home expenses · Calculating business-use-of-home expenses · Motor vehicle records · Keeping records

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