Statement of business or professional activities (T2125 and TP-80)

• What type of income did you earn?*

  Your self-employment income can be from:

  • Business income – income from any activity you do for a profit and includes sales, commissions, or fees
  • Professional income – income that is from a profession that has a governing body (such as one for lawyers, professional engineers, etc.)
  • Commissions – income that is from commission sales

• Type a keyword (sales, bookkeeping, legal, etc.) to find the industry code that best describes your main business activity*

  Enter a keyword that best describes your business activity. For example, if you’re a self-employed bookkeeper, type “bookkeeper” in this field. You’ll be able to see the industry code(s) that best match your entry. If you know your industry code, you can also just enter the number in this field.

  If more than one code applies to your business, enter the one that most closely describes your main business activity.
  

• What type of business do you have? (you own the business by yourself, you have partners, etc.)

  Select the ownership structure that applies to your business:

  • If you own the business by yourself and you’re fully responsible for its debts, select Sole proprietorship.
  • If you own the business with another person or multiple people and you’ve registered it as a partnership (you’ve received a partnership number), select Partnership.
  • If you co-own the business with another person (but it isn’t registered as a partnership), and each of you has a share in the business, select Co-ownership.

• What's your share of the business?

  If you’re a partnership or co-ownership, enter your percentage of share in the business. This percentage is used to calculate your business income and expenses correctly.

  Note: This percentage is not used to calculate your home office expenses or motor vehicle expenses (if applicable) –- those are calculated differently.

Typically, this is a period of 12 months, at the end of which the person carrying on the business prepares financial statements for the year. A fiscal period can’t be longer than 12 months but can be shorter in the year you started your business or ended it.

[QC] If you’re a Québec resident, your fiscal period end date must be December 31. However, if you’re electing to change your fiscal year end to a date other than December 31 for your federal tax return, the election will also apply to your Québec return. Remember, the fiscal period end date for both your federal and Québec return must be the same.

If your fiscal period doesn’t end on December 31, you’ll need to enter a few more details in this section in order to reconcile your business income with the calendar year.

Your responses to the questions below will help personalize your T2125 (and TP-80, if applicable) page.

Important: If you’re a partner in a partnership that must file a partnership information return, don’t complete this page. Instead, complete the Partners page.

Equity details

• What was the total amount of liabilities your business had at the end of its fiscal period?

  These are the amounts your business owes. Business liabilities can include tax payable, notes, unpaid salaries or wages, interest payable, unpaid loans, etc.
  
  

• What was the total value of the drawings you made (including your salary)?

  This is the total amount you withdrew in, cash, other assets, and services from your business during the year.
  
  

• What was the total amount of your capital contributions?

  This is the amount of cash or other assets that were added to your business, including personal funds.
  
  

• [QC] What was the balance of your accounts receivable at the end of your fiscal period?

  These are the outstanding amounts your business is to receive for its sales or services.
  
  

• [QC] What was the balance of your debts other than accounts receivable at the end of your fiscal period?

  This is the total amount in loans and advances made to others (such as short-term advances given to staff), etc.
  
  

• [QC] What was the amount of your outstanding loans, made to individuals or partnerships, at the end of your fiscal period?

  This is the total amount in loans and advances made to others that are still outstanding at the end of the business year.

Your business inventory (Québec only)

• [QC] Describe the inventory (goods) your business had at the end of its fiscal period

  Enter a brief description of the type of inventory your business had at the end of the year.
  
  

• [QC] Where is your inventory located?

  Enter the location (such as the business address, storage facility, etc.) where the inventory is located.

Your business' movable property (vehicles, equipment, furniture, etc.) (Québec only)

• [QC] What's the name of your creditor?

  If you’ve leased the movable property or you took a loan to buy the movable property, enter the name of the company from which you’ve leased or borrowed money for this movable property.
  
  

• [QC] What's the book value of this property?

  This is the amount you paid for the movable property.

Your business' immovable property (land and buildings) (Québec only)

• [QC] What's the name of your creditor?

  If you took a loan to buy the immovable property, enter the name of the company from which you’ve borrowed money for this immovable property.
  
  

• [QC] What's the book value of this property?

  This is the amount you paid for the immovable property.

• Your partnership’s business number, assigned by the CRA– Enter the 9-digit business number assigned to your partnership by the CRA. You can find this number on your T5013 slip.
  
  
• [QC] Your identification number assigned by Revenu Québec - only enter this number if you lived in Québec on December 31, 2020

  Enter the identification assigned to your partnership by Revenu Québec. You can find this number on your RL-15 slip.

You'll need to know the percentage of your business' gross income (from sales, advertising, etc.) that was from your business website or webpage. If you're not sure of the exact percentage, enter an estimate on this page.

Your business expenses

Enter only the part of these costs that’s related to the business. Don't enter personal expenses.

• Advertising

  If you paid for advertising costs to earn business income, you can deduct these expenses. Advertising costs can include ads in Canadian newspapers, Canadian television and radio stations, business cards, and any amounts paid as finder’s fees.
  
  

• Meals and Entertainment

  If you paid for meals and entertainment to earn business income, you can claim a maximum of 50% of the lesser of the following amounts:

  • The amount you paid for the expenses or
  • An amount that is reasonable in the circumstances
  
  

• Bad debts

  A bad debt is money owed to your business that you can’t collect. You can deduct this amount if you’ve determined that an account receivable in the year is bad debt and you’ve already included that amount in the income for the year.
  
  

• Commercial insurance premiums

  You can deduct commercial insurance costs you incurred on any buildings, machinery, and equipment that is used in your business. To deduct insurance costs for the business use of your motor vehicle, enter these on the Motor Vehicle section of the T2125/TP-80-V page. Insurance costs for the business use of your home can be entered in the Business-use-of-home expenses section.
  
  

• Interest paid on money you borrowed for the business

  You can deduct interest paid on a loan borrowed for your business or to acquire property for business purposes. There might be limits on the amount of interest you can deduct on money borrowed to buy a vehicle or you can deduct on vacant land.
  
  

• Business tax, fees, licenses, dues, memberships and subscriptions

  You can deduct annual license fees and business taxes you incurred to run your business, and annual dues or fees for membership in a trade or commercial association. Club memberships for the purpose of recreation are not claimable.
  
  

• Office expenses

  You can deduct the cost of office supplies such as stationery, stamps, pens, etc. Expenses such as filing cabinets, chairs, desks, and calculators are capital items and can’t be claimed here; instead, claim these expenses in the CCA section.
  
  

• Supplies

  You can deduct the cost of items your business used indirectly to provide goods or services. For example, if you’re operating a plumbing business, the cost of cleaning supplies can be deducted.
  
  

• Legal, accounting and other professional fees

  You can deduct costs incurred for professional advice or services, consulting fees, including accounting and legal fees incurred to get advice and help with keeping your records. You can also deduct fees you incurred for preparing and filing your tax and GST/HST returns.
  
  

• Management and administration fees

  You can deduct management and administration fees, and bank charges incurred to keep your business running. Don’t include rent paid, property taxes, or wages paid here.
  
  

• Rent

  You can deduct rent paid for the property used in your business. Don’t enter rent related to the business use of your home here; instead, claim that in the Business-use-of-home expenses section.
  
  

• Maintenance and repairs (include labour and material costs)

  You can deduct the cost of minor repairs or maintenance done on the property used for business purposes. However, you can’t deduct the cost of your own labor, the costs that are capital in nature, or those that have been reimbursed by an insurance company.
  
  

• Salaries, wages, and benefits paid to your employees

  Gross salaries and other benefits paid to employees can be deducted here. Click this link for information on what not to include in this field.
  
  

• Property taxes

  You can deduct the property taxes you’ve paid for the property in your business. Don’t enter property taxes related to the business use of your home here; instead, claim in the Business-use-of-home expenses section.
  
  

• Travel expenses

  Travel expenses you incurred to earn business or professional income can be claimed here and include:

  • Public transportation fares
  • Hotel accommodations
  • Meals

  Generally, a 50% limit applies to the cost of meals, beverages, and entertainment when you travel.

  
  

• Telephone and utilities

  If you paid for expenses such as telephone, gas, oil, electricity, and water to earn business income, you can deduct these costs. Utilities that are related to the business use of your home can’t be claimed here; instead, claim them in the Business-use-of-home expenses section.

  Don’t deduct the basic monthly rate of your home telephone. However, you can deduct any long-distance telephone calls you made on your home telephone for your business. If you have a separate telephone for business calls only, you can deduct its basic monthly rate.
  
  

• Fuel and lubrication

  Enter the cost of fuel such as gas, motor oil, and lubricants used in your business.

  Don't include cost of fuel/lubrication used for your motor vehicle here. Enter those costs in the motor vehicle expenses section.
  
  

• Delivery, freight, express and messenger services

  You can deduct delivery, freight, and express costs you paid for business purposes.
  
  

• Allowance on the capital property you’re claiming

  You might have bought property for business purposes that does not physically exist (goodwill, licenses, franchises, etc.) but gives you a lasting economic benefit. The full cost of such property can’t be deducted but a portion of the cost can be deducted each year. Click here for more information.

Other expenses – such as the cost of cell phone calls (including costs paid to purchase a package or prepaid air time, as long as these were used for business purposes) and Internet charges (including costs paid to purchase a package or costs billed on a per-usage basis). Additionally, you can deduct the following expenses only if they were paid exclusively for business purposes:

• monthly charge for Internet access
• charges for an Internet connection
• cost of having a cellular telephone licensed or connected

• Amount shown on the Business-use-of-home expenses available to carry forward line on your T2125 from 2019

  You might not have used all of your home office expenses last year to reduce your income tax payable. If that is the case, enter the amount from the Business-use-of-home expenses available to carry forward line on your 2019 T2125 form.
  
  

• [QC] Amount shown on line 534 on your TP-80-V from 2019 (only enter an amount here if you lived in Québec on December 31, 2020)

  You might not have used all of your expenses last year to reduce your income tax payable. Your unused expenses amount can be found on line 534 of your preceding year’s TP-80 form.
  
  

• Home office expense

  You can deduct a part of the following costs for the business use of your home.

  • Heat
  • Electricity
  • Insurance
  • Maintenance
  • Mortgage interest
  • Property taxes
  • Capital cost allowance
  • Other expenses

  To calculate the portion you can deduct, take the area of your workspace and divide it by the total area of your home.

  If you use your home for business and personal purposes, you can use the following formula to calculate the amount you can deduct:

  (Hours in the day you used the area for business ÷ 24 hours) X Business portion of your total home expenses

  
  

• Did you use part of your home to run a private residential home, tourist home, bed and breakfast, or participating establishment in a hospitality village?

  If you used part of your home to operate a private residential home, bed and breakfast, etc., the 50% limit for claiming business-use-of-home expenses does not apply.

You can deduct motor vehicle expenses only when they’re reasonable and you have receipts to support them.

To receive the full benefit of your claim for each vehicle, keep a record of the total kilometres you drive and the kilometres you drive to earn business income. Since only the business portion of your motor vehicle expenses is claimable, you’ll need to enter both numbers for your expenses to calculate correctly.

Note: For each business trip, list the date, destination, purpose, and number of kilometres you drive. Record the odometer reading of the vehicle at the start and end of the fiscal period.

Tip: If you’ve used more than one vehicle for your business, you’ll need to add the mileage and expenses for each vehicle and enter the total of these amounts in the respective fields on this page.

The type of expenses you can deduct are:

• licence and registration fees
• fuel and oil costs
• insurance premiums
• maintenance and repairs
• electricity for zero-emission vehicles
• parking fees for business activities
• supplementary business insurance premiums
• capital cost allowance (enter this on the Capital cost allowance section of the T2125/TP-80 form)

If you use a motor vehicle for business and personal use, you can only deduct the portion of the expenses you paid to earn business income. However, you can deduct the full amount of parking fees related to your business activities and supplementary business insurance for your motor vehicle.

Purchase or lease of a passenger vehicle

• Is this vehicle a passenger vehicle?

  A passenger vehicle is a motor vehicle that is designed to carry people on highways and streets. It seats a driver and no more than eight passengers. Most cars, station wagons, vans, and some pick-up trucks are passenger vehicles.

  The following are not considered passenger vehicles: ambulance, bus, taxi, fire emergency-response vehicles, etc.
  
  

• Enter the total amount of interest you either need to pay (accrual method) or you paid (cash method) on your loan in your 2020 fiscal period

  The accrual method is one where you report your income or expenses in the fiscal period to which they apply, regardless of when you receive the income or paid the expenses. Generally, this is the method most commonly followed by self-employed individuals.

  In the cash method, you report income in the fiscal period you received it and deduct expenses in the fiscal period you paid them.

You can’t deduct the cost of property such as furniture, equipment, or a building in the year of purchase. However, as such property wears out over time, you can deduct a portion of its cost each year (generally for as long as you own the property). This deduction is called capital cost allowance (CCA).

• Choose the class for your depreciable property

  If you have assets of a business (buildings, equipment, vehicles, etc.), you can claim a yearly deduction on the depreciation on the cost of these assets, also known as CCA. The amount of deduction or CCA you can claim for your depreciable property depends on the class that property belongs to and its CCA rate.

  Notes:

  • You can usually claim CCA on only half of your net additions to a class in the year you bought the depreciable property. This is known as the half-year rule.

  • If your asset is a building, the CCA rate is 4%. If you bought a building in Canada after March 18, 2007 that you use for business purposes, you might qualify for an additional allowance, increasing your CCA rate to 10%. To be eligible, you need to use at least 90% of the building for your business. Manufacturing and processing buildings that don’t meet the 90% requirement, will be eligible for an additional 2% allowance (increasing your CCA rate to 6%), if at least 90% of the building is used for non-residential purposes at the end of 2020.

  
  
• Do you want to claim the CCA for this depreciable property as a partner-level expense? (answer No if you’re claiming the CCA for the partnership)

  As a partner in a partnership, you can’t claim CCA for depreciable property that is owned by the partnership. However, if you paid for depreciable property that isn’t owned by the partnership and the cost of which wasn’t reimbursed to you by the partnership, you can claim CCA for it as a partner-level expense.
  
  

• If this isn't the first time you're claiming CCA, what was the undepreciated capital cost (UCC) balance for properties in this class at the start of 2020

  UCC is equal to the total capital cost of all the depreciable property of the class minus the capital cost allowance (CCA) you claimed in previous years. Enter the UCC for each class at the end of last year.

  Skip this field if this is the first year you’re claiming CCA.
  
  

• What’s the total cost of additions made to this class in 2020?

  If you purchased or made improvements to depreciable property in the year, the CRA considers these to be additions to the class in which the property belongs. Add the total business part of the cost you paid to buy or improve the properties that belong to the same class and enter it in this field.

  Click Add another class, to enter the cost of additions for a different class.
  
  

• If you disposed of a property in this class in your 2020 fiscal period, what were your proceeds of disposition? Enter the lowest amount: the amount you received for the property or the capital cost

  Also, include any insurance proceeds for a property that was lost or destroyed that are more than the cost of the property, you will have a capital gain and possibly a recapture of CCA.

• Do you want to claim less than the maximum amount of CCA you can claim this year?

  You don’t have to claim the maximum amount of CCA for the year; you can claim any amount that’s less than the maximum allowed. When you claim CCA, it reduces the balance of the class by the amount you’ve claimed, so you have less to CCA to claim in future years. For example, if you don’t have to pay income tax for 2020, you might not want to claim CCA for the year.

• How much of the amount you entered in the previous field is for additions for accelerated investment incentive properties (AIIPs) that were acquired after November 20, 2018? The new property must be available to use before 2024

  Under the Accelerated Investment Incentive measure, certain capital property that is subject to the general CCA rules (referred to as eligible property) will be eligible for an enhanced first-year allowance, provided it is acquired after November 20, 2018. The new property must be available for use before 2028. With this measure, eligible property that was:

  • subject to the half-year rule will now qualify for an enhanced CCA that is equal to three times the normal first-year deduction
  • not subject to the half-year rule will qualify for one and a half times the first-year deduction

  Note: The Accelerated Investment Incentive measure doesn’t change the total amount that’s deductible over the life of a property. You’ll simply be claiming a larger CCA deduction in the first year and smaller CCA deductions in future years.

Québec - Additional capital cost allowance

An additional capital cost allowance of 35% was introduced for Québec businesses that bought new qualified property after March 28, 2017 but before April 1, 2019.

Qualified property includes:

• machinery and equipment bought mainly with a view to using them for manufacturing and processing goods intended for sale or lease
• general-purpose electronic data processing equipment and systems software for that equipment

You must put the qualified property to use within a reasonable time after it was bought, and it must be used mainly for the purpose of carrying on a business during a period of 730 consecutive days following the day it was first used. It must also be used mainly in Québec throughout the 730-day period.