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Side hustle tax basics in Canada: what to report (educational)

By FastBuySale Newsroom · 9 Nov 2026 · 14m ago

Why side income needs attention

Plenty of Canadians earn money outside a regular job: freelancing, selling crafts, tutoring, driving for apps, renting a room or creating content. Employers withhold tax on wages, but nothing is withheld on most side income, so a tax bill can arrive in spring. The CRA also now receives information directly from digital platforms, which makes accurate reporting essential.

This educational guide explains what to report and how, using CRA guidance. It is not tax advice; individual circumstances matter, and Quebec residents also deal with Revenu Quebec for provincial tax. Nothing here promises income.

Hobby or business?

The key question is whether you are carrying on a business. A pursuit undertaken in a sufficiently commercial manner, with the intention of making a profit, is generally a business. Indicators include regular activity, marketing, a business plan, records and pricing intended to produce a profit. A purely personal hobby is not a business, and occasional income from it is generally not business income.

Example: Hannah knits scarves for family and sells a few at a holiday fair each year at roughly the cost of materials. That looks like a hobby. Liam knits weekly, sells through an online store and at markets, tracks costs and plans to grow. That is a business, and his profit is taxable.

Side income you generally report

Business or professional income from goods or services you sell regularly, including online sales and freelance work.

Gig platform income, including ridesharing, delivery and task-based work, plus tips and bonuses.

Rental income from a room, a property or a parking space, including short-term rentals.

Content creation income, such as platform payouts, sponsorships and products received as payment for promotion.

Investment income and capital gains, including on crypto assets.

Side income that is generally not taxable

Selling your own personal-use items, such as used furniture or clothing, usually produces no taxable gain because they sell for less than you paid. Listed personal property, such as art, jewellery, rare books, stamps and coins, is an exception, and gains may be taxable. Gifts and inheritances are generally not income.

How to report: Form T2125

Self-employed individuals report business income and expenses on Form T2125, Statement of Business or Professional Activities, with their T1 income tax and benefit return. You report gross income, then deduct reasonable business expenses to arrive at net income. Net business income is added to your employment and other income.

Common deductible expenses include supplies and materials, platform fees, advertising, software, the business share of phone and internet costs, the business share of vehicle expenses supported by a logbook and business-use-of-home expenses if you meet the conditions. Personal expenses are not deductible.

GST/HST

Most small side businesses are small suppliers and do not have to register for GST/HST until their taxable supplies exceed 30,000 dollars in a single calendar quarter or over four consecutive calendar quarters. Once registered, you charge GST/HST on taxable sales, can claim input tax credits on business purchases and file returns. Commercial rideshare drivers are the exception: they must register and collect GST/HST from the first fare, regardless of income. Voluntary registration below the threshold is allowed and can help if you have significant business purchases.

CPP on self-employment

If you are self-employed, you pay both the employee and employer portions of CPP contributions on your net self-employment earnings above the basic exemption, up to the annual maximums. If you also have a job, CPP already paid through payroll counts toward the annual maximum. Part of the contribution is deductible and part generates a non-refundable tax credit.

Platform reporting and the CRA

Under Canada's reporting rules for digital platform operators, which started with the 2024 calendar year, platforms that facilitate services, rentals and sales of goods must collect information about sellers and report their income to the CRA. Even if you never receive a slip from a platform, you must still report the income. The CRA can compare platform data with returns.

Deadlines, instalments and payments

If you or your spouse or common-law partner carried on a business, the filing deadline is generally 15 June, but any balance owing is due by 30 April, and interest runs from then. If your net tax owing exceeds 3,000 dollars, or 1,800 dollars for Quebec residents, in the current year and either of the previous two years, the CRA may ask you to pay instalments during the year.

Worked example: salaried employee with a side business

Priya earns 65,000 dollars from a salaried job in Ontario and makes 12,000 dollars in gross income from freelance graphic design, with 2,000 dollars of expenses. Her net business income is 10,000 dollars, reported on Form T2125. That 10,000 dollars is added to her salary and taxed at her combined federal and provincial marginal rate. Because she is self-employed, she also owes both portions of CPP on her net self-employment earnings, subject to the maximums and her CPP already paid through payroll. Her gross business income is below 30,000 dollars, so she does not have to register for GST/HST. She sets aside about 35 percent of each freelance payment to cover income tax and CPP.

Business-use-of-home and vehicle expenses in detail

If you run your side business from home, you may deduct a portion of home expenses such as utilities, home insurance, maintenance and rent, or mortgage interest and property tax for owners, if the space is your principal place of business or is used only to earn business income and regularly to meet clients. The deductible share is usually worked out by floor area. Business-use-of-home expenses cannot create or increase a business loss, but unused amounts can be carried forward.

For a vehicle used partly for business, keep a logbook of business trips with dates, destinations, purposes and kilometres. Your deductible share is business kilometres divided by total kilometres, applied to fuel, insurance, maintenance, licence fees, interest on a car loan and capital cost allowance. Driving from home to a regular job is personal, not business, travel.

Expenses people often get wrong

Claiming the whole phone bill when only part of the use is for business.

Deducting equipment in full in one year when it should be depreciated through capital cost allowance.

Forgetting to report payments received in kind, such as products given in exchange for promotion.

Missing legitimate expenses, such as platform fees deducted before payout, which reduce taxable income.

Records to keep

Keep records of income and expenses, invoices, receipts, bank statements, platform statements and vehicle logbooks for six years from the end of the tax year they relate to. A separate bank account for the side business makes this simpler.

Fixing mistakes

If you have not reported side income in past years, you can request a change to a previous return. In some cases, the CRA's Voluntary Disclosures Program may offer relief from penalties and part of the interest, subject to conditions. A qualified tax professional can help decide the best route.

Printable checklist

Activity: hobby or business, judged on commercial intent and conduct?

Income: every stream identified, including platforms, tips, rentals and content income?

T2125: gross income and reasonable expenses recorded?

GST/HST: rideshare, or close to the 30,000 dollar threshold?

CPP: both portions planned on net self-employment earnings?

Deadlines: return by 15 June, payment by 30 April, instalments if requested?

Records: kept for six years?

Common misunderstandings

"Small amounts do not need reporting." There is no general small-income exemption for business income.

"No slip means no tax." Self-employment income is reportable with or without a slip, and platforms now report to the CRA.

"I can deduct everything I spend on the hobby." Only reasonable business expenses of a real business are deductible.

The bottom line

Side hustle income in Canada is generally taxable when it comes from a business or other taxable source. Report it on Form T2125, plan for income tax and CPP, watch the GST/HST threshold and keep records for six years. Use the CRA's platform economy and self-employment guidance as your official references. This guide is educational only and not tax advice.

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