Side Hustle Taxes Canada Guide 2025

Freelancing, reselling, tutoring, or any other side income in Canada is taxable. Here's how to report it correctly and keep more of what you earn.

All Side Income Is Taxable in Canada

The CRA requires you to report all income from any source, including side hustles, regardless of how you are paid — cash, e-transfer, PayPal, crypto, or cheque. Common side hustles that must be reported include:

• Freelancing or consulting
• Selling handmade goods (Etsy, farmers markets)
• Reselling items online (eBay, Facebook Marketplace)
• Tutoring or teaching
• Photography, videography, or creative services
• Landscaping, cleaning, or home repairs
• Driving for rideshare or food delivery
• Content creation (YouTube, blogging, social media)

How to Report Side Income

Side hustle income is reported as self-employment income on Form T2125 (Statement of Business or Professional Activities). You report your gross income and then deduct eligible business expenses. The net profit is added to your personal tax return and taxed at your marginal rate. You also owe CPP contributions on net self-employment income above $3,500.

CPP on Self-Employment Income

If your net self-employment income exceeds $3,500, you must pay both the employee and employer portions of CPP contributions — effectively doubling the standard CPP rate. For 2024:

Item	Rate	Max (2024)
Employee CPP rate	5.95%	$3,867.50
Employer CPP rate	5.95%	$3,867.50
Self-employed total	11.90%	$7,735.00

You can deduct the employer-portion of CPP (50%) as a business expense, which partially offsets this cost.

Eligible Side Hustle Business Deductions

• Home office expenses (proportional to work area)
• Equipment and tools used for the business
• Phone and internet (business-use portion)
• Vehicle expenses (business kilometres vs. total)
• Advertising and marketing costs
• Professional development and courses
• Software subscriptions used for the business
• Materials and supplies
• Bank fees for a business account
• Professional fees (accountant, lawyer)

GST/HST Registration Threshold

If your total revenue from all your self-employment and side hustle activities exceeds $30,000 in a single calendar quarter or over four consecutive quarters, you must register for a GST/HST account and start charging, collecting, and remitting GST/HST. This is the "small supplier" threshold. Below $30,000, registration is optional (but can be beneficial to claim input tax credits).

Keeping Track of Side Hustle Income and Expenses

Good record keeping is essential. The CRA can audit self-employment income and will ask for documentation. Best practices:

• Keep a separate bank account for side hustle income and expenses
• Save all receipts digitally (photos, email confirmations)
• Track mileage if you use your vehicle for the business
• Use accounting software or a spreadsheet to track income and expenses monthly
• Keep records for at least 6 years

Hobby vs. Business: The CRA Test

If you consistently report losses from your side hustle, the CRA may reclassify it as a hobby, disallowing your expense deductions. To be recognized as a business, you must have a reasonable expectation of profit. Keep records showing your business intent, marketing efforts, and any steps taken to improve profitability.