Side Hustle Tax Guide: How to Report Gig and Freelance Income in Canada
Driving for Uber, selling on Etsy, freelancing on Upwork, tutoring, or running any kind of side business? If you earned money outside your regular job, CRA expects you to report it.
Here’s how to handle your side hustle on your tax return.
All Income Must Be Reported
There’s no minimum threshold for reporting. Even $500 in side income needs to be declared. CRA receives data from platforms, banks, and payment processors. If you don’t report and they find out, you’ll face penalties, interest, and potential reassessment.
How to Report
Report side hustle income as self-employment income on Form T2125 (Statement of Business Activities). You’ll report gross income and deduct eligible expenses to arrive at net business income.
Expenses You Can Deduct
- Supplies and materials
- Platform fees and commissions
- Advertising and marketing
- Phone and internet (business portion)
- Home office (if you work from home)
- Vehicle expenses (business use, with mileage log)
- Software and tools
- Professional development and courses related to the business
CPP on Self-Employment Income
Unlike employment income where your employer pays half your CPP, self-employed individuals pay both halves. This adds up to about 11.9% on net business income (up to the annual maximum). The employer-equivalent portion is deductible on your return.
GST/HST: The $30,000 Question
If your gross business revenue exceeds $30,000 in any 12-month period, you must register for and charge GST/HST. Below that threshold, registration is optional but may be beneficial if you have significant business expenses (you can claim input tax credits).
Separating Business and Personal
The single best thing you can do: open a separate bank account for your side business. Deposit all business income there, pay business expenses from there. This makes tracking painless and protects you in an audit.
Quarterly Instalments
If you owe more than $3,000 in tax for the current year and one of the two prior years, CRA may require you to pay quarterly tax instalments. Miss them and you’ll face instalment interest charges.
Common Mistakes
- Not reporting cash income. Cash is still income.
- Mixing personal and business accounts. Makes tracking impossible and raises audit flags.
- Forgetting about CPP. The self-employed CPP bill surprises many first-time filers.
- No receipts. “I don’t have receipts” is not a CRA-accepted deduction method.
Need help reporting your side hustle income? Book a free consultation with FinGems.