Tax guide for Canadian handymen, tradespeople, and independent contractors — HST, tools, vehicles, and T2125.
Self-employed handymen, carpenters, electricians, plumbers, painters, and general contractors report all income on Form T2125. Revenue includes cash, cheque, e-transfer, and credit card payments from clients. The CRA increasingly cross-references contractor income with permit applications, supply invoices, and client-claimed home renovation credits.
Keep thorough records. The underground economy is a CRA enforcement priority.
Construction and renovation services are taxable supplies. Register for HST once your revenue exceeds $30,000. Active contractors often hit this threshold in their first year. Once registered, charge HST on labour and materials supplied as part of your service, and claim ITCs on business purchases (tools, supplies, truck).
| Expense | Notes |
|---|---|
| Tools and equipment | CCA Class 8 (20%) or immediate expense if under $1,500 |
| Vehicle expenses | 70¢/km or actual costs × business-use % |
| Truck / van payments | CCA Class 10 or 10.1; lease payments deductible |
| Fuel | Business-use % of all fuel costs |
| Materials and supplies | Materials purchased for specific jobs (COGS) |
| Work clothing / PPE | Safety boots, hard hat, hi-vis vest |
| Phone | Business-use % — client calls, quoting, scheduling |
| Business insurance | Liability insurance 100% deductible |
| Advertising | Kijiji, HomeStars, flyers, website |
| Subcontractor payments | Deductible; T5018 may be required |
| Accounting fees | 100% deductible |
| Home office | If you manage the business from home |
Contractors are among the heaviest vehicle expense claimers in Canada. If you drive a truck or van primarily for work, your business-use percentage may be 80–90%+. Track total km and business km with a mileage log. Deductible actual costs include: fuel, insurance, registration, repairs, maintenance, loan interest, and CCA (depreciation).
A dedicated work vehicle used only for business (no personal trips) can be claimed at 100% business use.
Business type: "Construction / Home Renovation Contractor." NAICS: 236118 or similar construction code. Enter gross revenue (all jobs billed), then deduct materials, subcontractor costs, and other business expenses. Net income flows to line 13500 of your T1. CPP contributions are calculated on Schedule 8.
Pay CPP at 11.9% on net self-employment income up to ~$71,300. If taxes owing exceed $3,000, quarterly installments apply. Many contractors owe significant CPP — often the largest single payment surprise at tax time. Actively set aside 30–35% of gross revenue for taxes and CPP throughout the year.
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Get KOHO Free — Use Code 45ET55JSYAInformational only. Not tax or legal advice. Consult a CPA for your specific situation, especially if you hire subcontractors or build new homes.