Form T2125 Explained: Statement of Business Activities, Line by Line

Short answer: Form T2125, Statement of Business or Professional Activities, is where self-employed people report business income and expenses with their personal T1 return. You give a six-digit industry code, report gross income on line 8299, deduct expenses line by line to reach net income before adjustments on line 9369, then subtract business-use-of-home expenses on line 9945 to get your net income on line 9946. Vehicle costs go on line 9281 and capital cost allowance on line 9936. Keep the records behind every line for six years.

T2125 is a Canada Revenue Agency (CRA) form, and for the 2026 tax year it goes in with your return by the dates in the self-employed tax deadline guide. The CRA explains it line by line in completing Form T2125 and in guide T4002. This page walks the form in order and names the record that supports each line. What you end up paying is covered in self-employed taxes in Canada, and the rest of the series is on the Canada guides hub.

What is a T2125 and who files one?

A T2125 is the statement a self-employed individual files with their T1 return to report business or professional income and the expenses against it.

It is not a separate return. The form works out your net business income, which joins your other income and is taxed at your personal rates. Your gross income from line 8299 goes on line 13499 of the T1 for business income, or line 13699 for professional income. A corporation never uses a T2125; it files its own corporate return.

Part 1: what goes in the identification section?

Your business details, the fiscal period the form covers, and a six-digit industry code.

• Industry code. Use the six-digit code from the latest North American Industry Classification System (NAICS). If more than 50% of your business is one activity, pick the code for that activity; chapter 2 of the T4002 guide explains what to do when no single activity passes 50%. A painting contractor and a graphic designer use different codes.
• Fiscal period. The start and end dates of the business year the form covers.
• Business details. The business name, the main product or service, and your business number if you have one, for example because you are registered for GST/HST.

Record to keep: a note of the code you chose and why, so you use the same one next year unless the business really changes.

Part 3: how do you report gross income on the T2125?

Report what you billed in the year, take out the sales tax you collected along with any returns and discounts, then add other income to reach line 8299.

The form splits income into Part 3A, business income, and Part 3B, professional income: fill in the one that applies and leave the other blank. In either part, any GST/HST or PST included in your sales comes back out, because sales tax you collect is not your income. That gives you adjusted gross sales (or adjusted professional fees) on line 8000. Part 3C then adds any reserves deducted last year (line 8290) and other income (line 8230) to reach line 8299, gross business or professional income.

Worked example. A freelance web developer in Ontario issues invoices totalling $79,100 for 2026, including $9,100 of 13% HST. Gross income is $70,000; the $9,100 belongs on the GST/HST return, not on the T2125.

Records to keep: every invoice, in sequence, and a year-end list that ties the total to line 8299. A gap in the numbering with no cancelled invoice to explain it is exactly what a reviewer asks about; how to invoice in Canada covers numbering.

Which expense lines does the T2125 have?

The expenses section has a numbered line for each standard category; total expenses go on line 9368, and gross income minus expenses is line 9369, net income (loss) before adjustments.

Line	Expense	Record that supports it
8521	Advertising	Invoices from the publisher or platform
8523	Meals and entertainment (50% claimable)	Receipt, plus who you met and why
8590	Bad debts	The unpaid invoice and why you decided it will not be paid
8690	Insurance	Policy and premium statements
8710	Interest and bank charges	Loan and bank statements
8760	Business taxes, licences and memberships	Licence, permit and dues receipts
8810 / 8811	Office expenses / office stationery and supplies	Supplier receipts
8860	Professional fees (including legal and accounting)	The professional’s invoice
8871	Management and administration fees	Invoices and agreements
8910	Rent	Lease and payment records
8960	Repairs and maintenance	Receipts, noting the asset repaired
9060	Salaries, wages and benefits	Payroll records
9180	Property taxes	Tax bills
9200	Travel expenses	Tickets, accommodation receipts, purpose
9220	Utilities	Utility bills
9224	Fuel costs (except for motor vehicles)	Fuel receipts
9275	Delivery, freight and express	Courier receipts
9281	Motor vehicle expenses (not including CCA)	Logbook plus receipts
9936	Capital cost allowance (CCA)	Purchase invoices and your CCA schedule
9270	Other expenses	Receipt plus a description

The meals line is limited to 50% of the lesser of what you spent and an amount that is reasonable in the circumstances. Anything you also use personally is claimable only for its business share. What counts as an adequate receipt is covered in self-employed expenses and receipts.

How do you claim motor vehicle expenses on the T2125?

Add up the year’s vehicle running costs, multiply by business kilometres ÷ total kilometres, and put the result on line 9281; the cost of the vehicle itself goes through CCA instead.

Running costs include fuel, maintenance and repairs, insurance, licence and registration fees, interest on a vehicle loan and leasing costs. Example: you drove 18,000 km in 2026, 12,600 of them for business, which is 70%. With $9,000 of running costs, you claim $6,300.

Record to keep: the CRA’s motor vehicle records page asks for a logbook entry for each business trip (date, destination, purpose and kilometres) plus the odometer reading at the start and end of the fiscal period. After one full year’s logbook as a base year, a three-month sample can support later years if the results stay within 10% of the base year. More on this in claiming vehicle expenses in Canada.

How does business-use-of-home work on the T2125?

You can claim part of your home costs only if the workspace is your principal place of business, or you use it only for the business and regularly to meet clients, customers or patients; the claim goes on line 9945 in Part 5.

Work out the business share on a reasonable basis, for example the workspace’s floor area divided by the home’s total finished area, and apply it to the home costs the CRA’s business-use-of-home page lists as eligible. Example: a 12 m² office in a 120 m² apartment is 10%; on $21,600 of eligible costs for the year, that is $2,160.

The claim cannot be more than your net business income before it, so it cannot create or increase a loss. Any amount you could not deduct carries forward to the next year as a home-office expense. Records to keep: the floor measurements, the year’s bills, and a note on how the room is used.

How is capital cost allowance (CCA) claimed on the T2125?

You do not deduct the full cost of equipment, vehicles or computers in the year you buy them; you claim CCA at the rate set for each class, and the total goes on line 9936.

Class	Typical assets	Rate
8	Furniture, appliances, tools costing $500 or more, other equipment	20%
10	Motor vehicles and some passenger vehicles	30%
10.1	Passenger vehicles above the cost ceiling ($38,000 before tax for vehicles bought in 2025)	30%
12	Small tools costing less than $500	100%
50	Computer hardware and systems software acquired after March 18, 2007	55%

The classes and rates are on the CRA’s classes of depreciable property page. The rate applies to the class’s remaining balance, and the year you buy an asset has its own first-year rules: the half-year rule applies to many classes (most Class 12 small tools are exempt), and the accelerated investment incentive changes the first-year claim for eligible property. Check the current rules each year, including the Class 10.1 ceiling for vehicles bought in 2026, rather than copying last year’s return.

Records to keep: the purchase invoice, the date the asset was available for use, and the sale price if you sell it.

…and where does Keel fit?

Keel: Invoice Maker & Receipts, an iPhone app by Ilura Technology, keeps the records the T2125 is built from: invoices sent as PDFs, receipts and expenses, and business mileage records, each kept under its job. It does not fill in a T2125, file returns, connect to the CRA or calculate tax owed; you or your accountant still choose the lines.

Records stay on your iPhone, with no account, no bank connection and no cloud sync, and the App Store privacy label reads “Data Not Collected.” Keel is free with no invoice limit (free invoices carry a small “Made with Keel” footer). Keel Lifetime is a one-time purchase ($249.99 USD, local price on the App Store) that adds accountant-ready exports and advanced reports, which make gathering year-end totals quicker, plus custom branding, a signature and premium templates. Keel: Invoice Maker & Receipts on the App Store.

Frequently asked questions

What is a T2125 form? It is the CRA’s Statement of Business or Professional Activities, the form self-employed individuals use to report business income and expenses with their personal T1 return. It works out your net business income on line 9946, which is then taxed at your personal rates alongside any other income. A corporation does not use it; it files its own corporate return.

Where do I find my T2125 industry code? Use the six-digit code from the latest North American Industry Classification System (NAICS). If more than 50% of your business is one activity, choose the code for that activity; chapter 2 of the CRA’s T4002 guide explains what to do when none passes 50%. Use the same code each year unless the business genuinely changes.

What is the difference between business and professional income on the T2125? They are reported in different parts of the form: business income in Part 3A and professional income in Part 3B, and you fill in only the one that applies. The gross figure from line 8299 then goes on line 13499 of your T1 for business income or line 13699 for professional income. Both use the same expense lines and reach net income the same way.

Do I need a T2125 if I got a T4A? Usually, yes. Fees for services in box 048 of a T4A must be reported on the self-employment income lines of your return (lines 13499 to 14300), which for most freelancers and contractors means the T2125, with your expenses deducted against them. Payers generally issue a slip only when they paid you more than $500 in the year, and if you are not sure you are self-employed, settle that first.

How long do I keep the records behind my T2125? Generally six years from the end of the last tax year they relate to, according to the CRA’s record-keeping rules. That covers invoices, receipts, the vehicle logbook, home-office measurements and CCA purchase invoices. If you keep records electronically, you have to keep them in an electronically readable format, even if you also have paper copies.

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This article is general information, not tax advice. Consult a qualified accountant or tax professional.