How do I report self-employment income on my Ontario tax return?

If you operate a business or practise a profession as a sole proprietor, you report your self-employment income on CRA Form T2125 (Statement of Business or Professional Activities), which you attach to your personal T1 income tax return. You report gross income, then deduct allowable business expenses to arrive at net income.

Net self-employment income is included in your total income and taxed at your combined federal and Ontario marginal rates. You also pay Canada Pension Plan (CPP) contributions on net self-employment income above the basic exemption — at a higher rate than an employee because you are responsible for both the employee and employer portions.

Ontario does not have a separate provincial return for self-employment income; it is filed alongside the federal T1 through your annual return, which is due April 30 (or June 15 if you or your spouse carried on a business, though any balance owing is still due April 30). Keeping organized records throughout the year makes the T2125 far easier to complete accurately.