T2125 Explained
A walk through form T2125, the expense lines most businesses use, and where it goes on your return.
The short version
- Form T2125, Statement of Business or Professional Activities, is where sole proprietors and partners report business revenue and expenses with their personal return.
- One T2125 per business. Two unrelated businesses means two forms.
- Net income from line 9946 flows to your T1: lines 13500 (business), 13700 (professional) or 13900 (commission), with gross amounts on 13499, 13699 and 13899.
- If you're a GST/HST registrant, report sales without the GST/HST you collected, and expenses net of the input tax credits you claim.
- Equipment and vehicles aren't expenses on day one; they go through capital cost allowance (CCA) on line 9936.
T2125 Explained: Business Income and Expenses
The T2125 is a business's whole year on four pages. It looks like a lot of boxes; in practice, most small businesses use a dozen of them. Fill it in from good records and it takes an evening. Fill it in from a shoebox in April and it takes a weekend and some imagination, which CRA doesn't reward.
How the result turns into income tax and CPP is on how self-employment tax works.
The Parts of the Form
| Part | What goes there |
|---|---|
| Part 1: Identification | Business name, address, fiscal period, main product or service, industry code, and whether it's a partnership |
| Part 2: Internet business activities | Websites and platforms you earn income from |
| Part 3: Business or professional income | Gross sales, commissions or fees; adjustments; cost of goods sold for businesses with inventory |
| Part 4: Net income (loss) before adjustments | The expense lines (below), down to line 9369 |
| Part 5: Your net income (loss) | Your share (if a partnership), less business-use-of-home (line 9945), equals line 9946 |
| Parts 6 onward | Other amounts, vehicle expenses, home expenses, CCA schedules, and capital purchases and sales |
The Expense Lines You'll Use Most
| Line | Expense | Watch out for |
|---|---|---|
| 8521 | Advertising | Includes website and online ads |
| 8523 | Meals and entertainment | Only 50% is allowed |
| 8690 | Insurance | Business policies; vehicle and home insurance go in their own sections |
| 8710 | Interest and bank charges | Business loans and accounts only |
| 8760 | Business taxes, licences and memberships | Not club memberships for recreation |
| 8810 / 8811 | Office expenses / stationery and supplies | Small items used up; equipment goes to CCA |
| 8860 | Professional fees | Accounting, legal, bookkeeping |
| 8910 | Rent | Business premises (not your home; that's line 9945) |
| 8960 | Repairs and maintenance | Repairs, not improvements |
| 9060 | Salaries, wages and benefits | Includes your share of CPP and EI for employees, not for yourself; family wages must be reasonable (see paying your spouse) |
| 9200 | Travel | Business trips; meals at 50% |
| 9220 | Utilities | Business premises |
| 9281 | Motor vehicle expenses | Business-use share from a logbook |
| 9936 | Capital cost allowance | Equipment, vehicles, computers over several years |
| 9945 | Business-use-of-home | Can't create or increase a loss |
“Other expenses” (line 9270) is for real expenses that don't fit elsewhere. A big number there invites a question.
Which line does this expense go on?
Describe the expense and your business. The assistant tells you the T2125 line, whether it's fully deductible, 50% or CCA, and what records to keep.
Getting It Right
- Report gross revenue, including cash and platform income before fees. See what counts as taxable income.
- GST/HST registrants: leave the GST/HST out of sales; reduce expenses by the input tax credits claimed.
- Personal use: claim only the business share of vehicle, phone, internet and home costs.
- Capital purchases: list them in the CCA area, not as expenses. See capital cost allowance explained.
- Keep receipts six years; see what receipts to keep.
Where It Goes on Your Return
Gross income goes on line 13499 (business), 13699 (professional) or 13899 (commission); net income from line 9946 on 13500, 13700 or 13900. CPP on the profit is calculated on Schedule 8. A negative number on line 9946 is a business loss, which reduces your other income. If clients sent T4A slips, those amounts are part of your gross income, not extra.
Sole Proprietor, Contractor or Freelancer
All three use the same T2125. The differences are in the details: see sole proprietor taxes, independent contractor taxes and freelancer taxes.
Return Check reads your T2125 before you file and flags the lines CRA reviews most: vehicle, home office, meals and “other.”
T2125 Questions
What is form T2125?
The Statement of Business or Professional Activities, used by sole proprietors and partners to report business or professional income and expenses with their personal tax return.
Do I need a separate T2125 for each business?
Yes. Each business needs its own T2125.
Where does T2125 net income go on my tax return?
Net income from line 9946 goes on line 13500 for business income, 13700 for professional income or 13900 for commission income, with gross amounts on 13499, 13699 or 13899.
Can I deduct a computer on the T2125?
Not as a regular expense. Computers and other equipment are deducted over several years through capital cost allowance on line 9936.
How much of business meals can I claim?
Generally 50% of meals and entertainment expenses, on line 8523.
Sources: CRA, Expenses section of form T2125; Guide T4002, Chapter 3. Checked October 2026. Part names follow the current T2125; minor wording differs between years.
Last reviewed October 4, 2026 against CRA and Government of Canada sources. How we check our facts.