The T2125 is the form self-employed individuals use to report business or professional income and expenses as part of their personal T1 return.
A sole proprietor or partner reports their business results on form T2125, Statement of Business or Professional Activities, filed with their personal T1. It captures gross revenue, then deducts business expenses, cost of goods sold, vehicle and home-office costs, capital cost allowance, to arrive at the net income that is taxed at personal rates.
The T2125 is where most self-employment deductions are claimed, so accuracy and documentation matter. It is also where the business-use percentages for vehicles and home office are applied, common areas of CRA review for the self-employed.
A freelance consultant reports $90,000 of revenue on the T2125, deducts $20,000 of expenses including a home-office claim, and reports the $70,000 net income on her T1, taxed at her personal rate.
Our certified accounting firm handles this for businesses and individuals across Canada, at fixed fees with no surprises.
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