Your first Canadian tax return as a self-employed newcomer is more complex than returns in subsequent years, because it covers a partial year of residency, may include foreign income from before you arrived, and involves new forms (T2125) you may never have filed before. Here is what to expect and how to file it correctly.
Key Difference: Arrival Year Returns
In the year you arrive in Canada, your T1 return covers only the period from your arrival date to December 31. You report Canadian-source income for the full period you were a Canadian resident, and may also need to disclose foreign income from before arrival (depending on your situation and tax treaties).
Your arrival date is when you “become resident” for Canadian tax purposes — generally the day you arrive in Canada with the intent to stay and establish residential ties (home, family, personal property).
What Forms You Need
- T1 General: Your personal income tax return. The main form.
- Schedule T2125: Statement of Business or Professional Activities. One for each business activity — this is where you report all self-employment income and expenses.
- Schedule 1: Federal income tax calculation — your software completes this automatically.
- T1248 (Information About Your Residency Status): Indicates your arrival date and that you are a first-year filer. Most tax software prompts this automatically.
- T1161 (List of Properties by an Emigrant/Immigrant): If you owned foreign property with total value over $25,000 CAD at arrival, this may be required. Consult a CPA.
Reporting Self-Employment Income on T2125
Report all business income earned during your Canadian residency period. If you arrived July 1 and worked as a freelancer from July 1 to December 31, your T2125 covers that 6-month period. Report:
- Gross revenue from all clients (including international clients) earned from your arrival date
- All deductible business expenses incurred from your arrival date
- Home office, internet, phone — prorated for the portion of the year you were resident if you set up your home office after arrival
Tax Software for Newcomers
Wealthsimple Tax (free): Handles partial-year residency returns and T2125. The smart search makes finding the right fields straightforward. Pay-what-you-want — $0 is fine.
TurboTax Self-Employed (~$60–$80): Best guided experience for first-time filers. The interview format is particularly useful if you are unfamiliar with Canadian tax forms.
CPA for year 1 (recommended): A CPA who specializes in newcomer taxation handles: the partial-year return, potential foreign tax credits for taxes paid in your home country, foreign property disclosures, and any treaty positions. Cost: $300–$600 for a straightforward year-1 return. The peace of mind and error prevention is often worth this cost in year 1.
Frequently Asked Questions
Do I report income earned in my home country before I came to Canada?
Generally no — income earned before you became a Canadian tax resident is not reported on your Canadian return. However, you may need to disclose it on your T1 as a factual resident, and certain assets owned before arrival may trigger deemed acquisition rules. Canada has tax treaties with many countries to avoid double taxation. A CPA familiar with your home country’s treaty with Canada gives you the most reliable answer for your specific situation.
Do I need to file a Canadian tax return if I only lived here for part of the year?
Yes — if you earned income during your Canadian residency period, you are required to file a Canadian return for that year. Even if you earned very little, filing establishes your RRSP contribution room and entitles you to government benefits (GST/HST credit, carbon rebate) based on your income.
Can I use CRA My Account in my first year as a newcomer?
Setting up CRA My Account typically requires a prior year’s Canadian Notice of Assessment or a registered credit card registered to a Canadian address. Many newcomers cannot create My Account digitally in year 1 and need to use paper mail or the CRA’s telephone registration method. Alternatively, some tax software enables CRA registration during the filing process. Contact the CRA at 1-800-959-8281 for guidance on first-year My Account setup.