Form T2125 Line by Line: How Self-Employed Canadians Report Business Income (2026 Guide)

Form T2125 has one job: turn your business income and expenses into a single net income figure, line 9946, which then flows to line 13500 of your personal T1. Everything else on the form exists to get you there correctly — gross income first, then expenses, then a couple of adjustments most people have never heard of. This is a line-by-line walk through the form as it actually flows, with every line number checked against the CRA's own "Completing Form T2125" pages and Guide T4002 as of September 21, 2026, so you can match what's below to what's in front of you.

New to T2125? Start with the plain guide — How to Fill Out Form T2125 (2026): A Step-by-Step Walkthrough — then come back here when you need the line numbers.

What Form T2125 is (and isn't)

T2125 is not a separate tax return. It's an attachment to your personal income tax and benefit return (the T1), and its only output is your net business or professional income — the number that gets added to any other income you have. The CRA's own hub for this is Completing Form T2125, with the full reference in Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income. If you run more than one distinct business, you complete a separate T2125 for each — but they all attach to the same T1.

The flow, gross to net

The form moves in a fixed order, and knowing the order removes most of the confusion:

Part 1 — Identification

Your name, SIN, business name, address, a six-digit industry code, and your fiscal period (calendar year, for most sole proprietors). Nothing here affects your tax bill; it just tells the CRA who and what you are.

Part 3 — Income

You report your gross sales, commissions, or fees, arriving at line 8299, gross business or professional income. This is where the GST/HST question comes up — more on that below.

Part 3D — Cost of goods sold

Only relevant if you sell physical products. Opening inventory plus purchases minus closing inventory gives your cost of goods sold, subtracted from sales to reach gross profit. Service businesses — most freelancers, consultants, and gig workers — skip straight past this.

Part 4 — Expenses

This is the part most people think of as "the T2125" — a named line for every category of business cost, running to line 9368 (total expenses) and line 9369 (net income before adjustments). It's worth being precise about this: expenses are Part 4, not Part 5 — a distinction that's easy to get backwards since several guides transpose it.

Part 5 — Your net income (loss)

Part 5 takes the Part 4 result (line 9369) and applies what's left: other amounts deductible (line 9943) and, for almost everyone who works from home, business-use-of-home expenses (line 9945) — landing on line 9946, your final net income (loss), per the CRA's Part 5 — Your net income (loss) page.

The Part 4 expense lines

Every one of these is confirmed on the CRA's own expenses section of Form T2125 page. Enter only the business-use share of anything you also use personally — your phone, your internet, your vehicle.

Line	Category	What it covers
8521	Advertising	Ads, sponsored posts, business cards, paid listings
8523	Meals and entertainment	Business meals and client or staff entertainment — deductible at 50% of the lesser of what you spent or a reasonable amount, per the CRA's line 8523 guidance (long-haul truck drivers: 80% during eligible travel periods)
8590	Bad debts	Invoices you already reported as income but will never collect
8690	Insurance	Commercial liability, equipment, and business-building insurance
8710	Interest and bank charges	Interest on business loans and business-account or processing fees
8760	Business taxes, licences, memberships	Business licences, professional dues, annual registration fees
8810	Office expenses	Everyday small supplies — pens, paper, printer ink, stamps
8811	Office stationery and supplies	Items your business uses directly to deliver goods or services
8860	Professional fees	Accountant, bookkeeper, lawyer, or consultant fees
8871	Management and administration fees	Outsourced admin and certain platform or management fees
8910	Rent	Rent for business premises or equipment — not your home office
8960	Repairs and maintenance	Fixing business equipment or premises
9060	Salaries, wages, and benefits	Pay for employees — not draws you take as the owner
9180	Property taxes	Property tax on business premises you own or rent — not your home workspace
9200	Travel	Business flights, hotels, and transit
9220	Utilities	Utilities for a dedicated business premises
9224	Fuel costs (except motor vehicles)	Fuel for business equipment — not your car
9275	Delivery, freight, and express	Shipping and courier costs
9281	Motor vehicle expenses	Business-use share of fuel, insurance, repairs, and registration (CCA is separate)
9270	Other expenses	Legitimate costs that don't fit an existing line — describe them
9936	Capital cost allowance (CCA)	Depreciation on vehicles, equipment, and other capital assets

The line most guides leave off is 9180. It's real, and it matters if you rent or own a dedicated business space — a studio, a shop, a separate office — but it comes with a catch: property tax related to business use of workspace in your home has to be claimed as business-use-of-home expenses instead, per the CRA's line 9180 guidance. Put your home's property tax through the home-office calculation, not line 9180.

Where GST/HST does — and doesn't — belong

If you're registered for GST/HST, the tax you charge clients is never your income, and the T2125 reflects that directly: enter your sales, commissions, and fees minus any GST and PST, or HST, and any returns, allowances, and discounts, per the CRA's Part 3A — Business income guidance. Invoice a client $5,000 plus $650 HST at 13%, and your business income is $5,000 — not $5,650. The same logic runs the other way on expenses: if you claimed the GST/HST on a purchase as an input tax credit, reduce the expense amount you report by that credit, so you're not deducting tax you already recovered.

The one real exception is the GST/HST quick method. Because the quick method lets you remit less than you collected, the CRA treats the difference between what you collected and what you actually remitted as income — it has to land somewhere, and the T2125 is where.

How CPP on this income connects to your instalments

Line 9946 doesn't just attract income tax. As a self-employed person, you pay both halves of CPP — 11.9% in 2026 — on net business income between the $3,500 basic exemption and the $74,600 ceiling, to a maximum of $8,460.90, plus CPP2 at 8% on earnings between $74,600 and $85,000, to a further maximum of $832 (Canada Revenue Agency). That combined CPP bill is calculated on the very net income figure this form produces, and it's added to your income tax when the CRA works out your instalment obligation for the following year — which is a large part of why a first profitable year on the T2125 can trigger an instalment reminder that feels out of nowhere. Our full 2026 CPP guide breaks down every dollar of that number, and the CRA instalment calculator turns your T2125 net income into an estimate of what you might owe by quarter.

What to keep, and for how long

Filling in a line is not the same as being able to defend it. Keep your records for six years from the end of the last tax year they relate to, unless you have permission from the CRA to destroy them earlier, per the CRA's Keeping Records (RC188) guidance. In practice that means every receipt behind every expense line, your mileage logbook for line 9281, and the square-footage or hours basis behind your business-use-of-home claim on line 9945 — not just the totals typed into the form.

Common T2125 mistakes

• Netting income against expenses before entering it. Report gross income in Part 3 in full, then let Part 4 subtract expenses — combining them yourself distorts the gross-income figure the CRA's matching systems watch.
• Claiming 100% of a mixed-use cost. Your phone, internet, vehicle, and home all get the business-use share only — estimate honestly and keep a basis for the percentage.
• Putting home-workspace property tax on line 9180. That figure belongs in the business-use-of-home calculation, not the standalone property-tax line, which is for a separate business premises.
• Treating owner draws as salary. Line 9060 is for actual employees. Money you take out of your own business is profit you're already being taxed on, not a deductible wage.
• No logbook for the vehicle claim, or no square-footage basis for home-office. Both line 9281 and line 9945 depend on a real ratio the CRA can ask you to show — a reconstructed guess in April rarely survives a review.
• Forgetting CPP when budgeting for what line 9946 will cost. Income tax is only part of the bill; the CPP calculated on the same figure is real money too, and it's the piece that most often catches first-year filers off guard.

Related deductions worth getting right

Two of the largest deductions on the form — vehicle and home office — have their own rules and their own calculators: the business-use ratio and 2026 caps are covered in our vehicle expenses guide and the vehicle expense calculator; the two-test eligibility and the loss-cap-and-carryforward rule for line 9945 are covered in our business-use-of-home guide and the home office expense calculator. If you're depreciating equipment or a vehicle for line 9936, the CCA calculator runs the declining-balance schedule for you.

The calm takeaway

The T2125 is intimidating exactly once — the first year, from a shoebox of receipts. Once you know the order (identification, gross income, expenses, then the home-office adjustment) and which line each cost belongs on, it becomes transcription rather than archaeology. This is an estimate, not advice — confirm anything specific to your situation against the CRA's Completing Form T2125 pages or a qualified accountant before you file.

Sources

• CRA — Completing Form T2125 (hub)
• CRA — Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income
• CRA — Part 3A, Business income (sales net of GST/HST/PST; quick-method exception)
• CRA — Part 3C, Gross business or professional income (line 8299)
• CRA — Expenses section of Form T2125 (Part 4; every expense line through 9368/9369, including line 9180)
• CRA — Line 9180, Property taxes (business premises only; home workspace goes through business-use-of-home)
• CRA — Part 5, Your net income (loss) (lines 9943, 9945, 9946)
• CRA — Self-employment income, lines 13499–14300 of the T1
• CRA — CPP contribution rates, maximums and exemptions (2026: $74,600 / $3,500 / 11.9% / $8,460.90 self-employed max)
• CRA — Second additional CPP (CPP2) rates and maximums (2026: $85,000 ceiling, 8% self-employed, $832 max)
• CRA — Keeping Records (RC188): six years from the end of the last tax year they relate to

This article explains CRA rules in plain language. It is general information, not tax advice for your situation — every line number and figure above was verified against the Canada Revenue Agency on September 21, 2026. Rules and thresholds change; check the current CRA page before relying on a number.