Form T2125 (Statement of Business or Professional Activities) is the CRA form you attach to your T1 personal income tax return to report self-employment income and expenses. If you freelance, consult, or run any unincorporated business in Canada, T2125 is how you report it.
What T2125 Does
T2125 calculates your net self-employment income: your gross business revenue minus all allowable business expenses. This net figure flows into your T1 personal return as self-employment income and is taxed at your marginal personal rate.
The form also calculates your CPP contribution base — you pay CPP at 11.9% on net self-employment income between $3,500 and $74,600 (the YMPE for 2026), with a maximum contribution of $8,460.90.
The Structure of T2125
T2125 is a 7-page form divided into nine parts. The parts you will use as a typical freelancer:
- Part 1 — Identification: Business name, address, main product/service, fiscal year dates (most freelancers use January 1–December 31), and Industry Code (a 6-digit code from CRA’s list describing your industry)
- Part 2 — Income: Gross business income (all revenue before expenses). Do not include GST/HST you collected — that is not your income.
- Part 4 — Expenses: Deductible business expenses line by line (see below)
- Part 7 — Business-use-of-home expenses: Home office deduction calculation using square footage method
- Part 8 — CCA (Capital Cost Allowance): Depreciation on business assets like computers, equipment, and vehicles
Deductible Expenses on T2125 (Common Lines)
| Expense | T2125 Line | Notes |
|---|---|---|
| Advertising | 8520 | Website, Google Ads, business cards, social media ads |
| Business taxes, licences, memberships | 8760 | Professional association fees, business licences |
| Insurance | 8690 | Professional liability, business property insurance |
| Interest and bank charges | 8710 | Business credit card interest, bank account fees |
| Legal and professional fees | 8860 | Accountant, lawyer for business matters |
| Meals and entertainment | 8523 | 50% of eligible meals with business purpose |
| Office expenses | 8810 | Software subscriptions, stationery, printer ink |
| Professional fees (not legal) | Use 8860 | Subcontractors, freelancers you hire for project work |
| Telephone and utilities | 9270 or 9220 | Business portion of phone and internet |
| Travel | 9200 | Business travel costs (flights, hotels, ground transport) |
| Vehicle expenses | 9281 | Business portion only — requires logbook |
| Other expenses | 9270 | Anything reasonable and necessary not listed above |
Important Rules
GST/HST collected is not income: If you are registered for GST/HST, the tax you collected from clients is not your revenue. Report only the net amount (what clients paid before the tax portion). GST/HST collected goes to a separate liability account — not on T2125.
Meals and entertainment: 50% rule: Only 50% of eligible meal and entertainment expenses with a business purpose are deductible. Enter the full amount; CRA software applies the 50% automatically.
Personal portion excluded: If an expense is partly personal (phone, internet, home), only the business portion is deductible. Keep records showing how you calculated the split.
Home office cannot create a loss: The business-use-of-home deduction (Part 7) cannot reduce your net business income below zero. Excess amounts carry forward to the next tax year.
Filing T2125
T2125 is not filed separately — it is attached to your T1 personal return. The T1 due date for self-employed is June 15 to file, but April 30 to pay any balance owing.
Tax software (Wealthsimple Tax, TurboTax, UFile, H&R Block) guides you through T2125 within the T1 workflow. If filing manually, download T2125 from canada.ca and attach it to your T1 when mailing.
Frequently Asked Questions
Do I file T2125 even if my self-employment income is very small?
Yes. All self-employment income must be reported on T2125, regardless of amount. If you earn $500 in freelance income, it goes on a T2125. The form also lets you claim any legitimate expenses against that income, potentially reducing your net income to $0 or triggering a small business loss.
What is an Industry Code and how do I find mine?
The CRA’s Industry Code is a 6-digit number that classifies your type of business. It helps the CRA benchmark your expense ratios against similar businesses. Find it in the T4002 guide or by searching “CRA industry codes” for the relevant category. Common freelance codes: 541514 (Computer programming services), 541810 (Advertising agencies), 711510 (Independent performing artists).
What if I have two different freelance businesses?
File a separate T2125 for each distinct business activity. A single T1 return can include multiple T2125 forms — one per business. “Distinct” means different primary activities, not different clients within the same business.