Business income types

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Business income

Sales, bartering, commissions, or fees

Business income

Tick the box in Part 1 of Form T2125, Statement of Business or Professional Activities to show that you have non-professional business income.

You should complete this part only if you have business income. If you have professional income, leave this part blank and complete Part 2. If you have both business and professional income, you have to complete a separate Form T2125, for each.

• Line A - Sales, commissions, or fees
• Line C - Adjusted gross sales

Sales, bartering, commissions, or fees

Your sales include all sales, whether you receive or will receive money, something the same as money (such as credit units that have a notional monetary value), or something from bartering should be included on line A.

Bartering occurs when two people agree to exchange goods or services without using money. For more information on bartering, see Interpretation Bulletin IT-490, Barter Transactions.

On line A enter the gross sales, commissions, or fees (including GST/HST collected or collectible).

On line (i) enter any GST/HST, provincial sales tax, returns, allowances, discounts included in sales, and GST/HST adjustments (included on line A). Line B is the total of line A minus line (i).

For more information on the quick method and examples of how it works, see Guide RC4058, Quick Method of Accounting for GST/HST.

If you are a self-employed commission salesperson, enter the commissions you received on this line.

Adjusted gross sales

Line C is the total of the amounts from line B plus line (iv).

Enter your sales, commissions, and fees minus any GST and PST, or HST, and any returns, allowances, and discounts, if these have been included in your sales.

Enter this amount on line 8000 - Adjusted gross sales or adjusted professional fees, in Part 3 of Form T2125

Professional income

Tick the box in Part 2 to show that you have professional income.

You should fill in this part only if you have professional income. If you have business income, leave this part blank and fill in Part 1. If you have both professional and business income, you have to fill in a separate Form T2125, Statement of Business or Professional Activities, for each.

Usually, you calculate your income from professional activities using the same rules as for a business. However, some aspects of professional activities are different from those of other types of businesses. Some of these differences are discussed below.

• Line D - Professional fees
• Line F - Adjusted professional fees

Professional fees

Your professional income includes all fees you receive for goods or services you provide, whether you receive or will receive money, something the same as money (such as credit units that have a notional monetary value), or something from bartering.

As a professional, your income generally includes the value of your work-in-progress (WIP). WIP is goods or services that you have not yet finished providing at the end of your fiscal period.

Your professional fees for the current year are the total of:

• All amounts you received during the year for professional services, whether you provided the services before or during the current year or after your current year-end;

plus:

• all amounts receivable at the end of the current year for professional services you provided during the current year; and
• the value of your WIP at the end of your current year for which you have not received any amount during the year;

minus:

• all amounts receivable at the end of your previous year-end; and
• the value of your WIP that was included in professional fees at the end of your previous year.

On line D, enter the gross professional fees including work-in-progress (WIP) and GST/HST collected or collectible.

On line (i) enter any GST/HST, provincial sales tax, returns, allowances, discounts, and GST/HST adjustments (included on line D)and any WIP at the end of the year you elected to exclude. Line E is the total of line D minus line (i).

Add the WIP for the start of the year if you excluded it at the end of last year.

Election to exclude your WIP

You can choose to exclude your WIP when you calculate your income if you are one of the following professionals:

• an accountant;
• a dentist;
• a lawyer (including a notary in Quebec);
• a medical doctor;
• a chiropractor; or
• a veterinarian.

If you did not choose to exclude your WIP in any previous year, you can do so in the current year. You do not need a special form to do this. Attach a letter to your income tax return telling us that you want to exclude your WIP.

You can also exclude your WIP by doing the following:

• On the "Work-in progress, end of the year, per election to exclude WIP" line, write the amount you included as WIP attend of the year in your professional fees on line D.
• On the "Work-in-progress, start of the year, per election to exclude WIP" line, write the amount of your WIP at the start of the year, if you excluded it at the end of last year.

Make this election when you file the original income tax return to which it relates. If you are filing an amended return, you cannot make this election.

For partnerships, an authorized partner must choose to exclude the partnership's WIP on behalf of all partners.

The choice to exclude WIP stays in effect for each following year, unless you file an application and we let you make the change. For more information, see Interpretation Bulletin IT-457R, Election by Professionals to Exclude Work in Progress from Income.

Adjusted professional fees

Adjusted professional fees on line F is the total of the amounts from line E plus lines (iv) and (v). Enter this amount on line 8000 - Adjusted gross sales or adjusted professional fees, in Part 3 of Form T2125.

Gross business or professional income

Adjusted gross sales or adjusted professional fees

If you are completing Form T2125, for a business activity, enter your adjusted gross sales from line C, adjusted gross sales, in Part 1.

If you are completing Form T2125 for a professional activity, enter your adjusted professional fees from line F, adjusted professional fees, in Part 2.

Enter the amount from line C or F on line 8000 - Adjusted gross sales or adjusted professional fees, in Part 3 of Form T2125.

Reserves deducted last year

Include any reserves you deducted for the previous period on line 8290. For more information, go to Allowable reserves.

Other income

Enter the total income you received from other sources on line 8230. Some examples of other income you would report on this line are:

• a recovery of an amount you wrote off as a bad debt in a previous year;
• the value of vacation trips or other prizes awarded to you because of your business or professional activities;
• payments for land you leased for petroleum or natural gas exploration; and
• grants, subsidies, incentives, or assistance you get from a government, government agency, or non-government agency. Since input tax credits are considered government assistance, include on this line the amount you claimed on line 108 of your GST/HST return only if you cannot apply the rebate, grant, or assistance you received to reduce a particular expense or an asset's capital cost. For more information, go to Grants, subsidies, or other incentives or inducements.

If you used the quick method to calculate your GST/HST remittances, report the 1% credit (maximum $300) that you claimed on line 107 of your GST/HST return. For more information, see Interpretation Bulletin IT-273, Government Assistance - General Comments.

Also, do not include in income any other rebate, grant, or assistance you receive, but subtract that amount from the applicable expense or the cost of capital property it relates to. If the rebate, grant, or assistance is for a depreciable asset, subtract the amount you received from the asset’s capital cost. This will affect the amount of CCA you can claim for that asset. For information about CCA, see Claiming capital allowance (CCA). If the asset qualifies for the investment tax credit, this reduction to the capital cost will also affect your claim for the investment tax credit. For more information, see Form T2038 (IND), Investment Tax Credit (Individuals).

Gross business or professional income

Enter your gross business or professional income on line 8299. This is your adjusted gross sales or adjusted professional fees (line 8000, Adjusted gross sales or adjusted professional fees) plus any reserves deducted last year (line 8290, Reserves deducted last year), and any other income (line 8230, Other income). Enter this amount on the appropriate line of your income tax return.

Part 4 - Cost of goods sold and gross profit

Forms and publications

• Guide T4002, Business and Professional Income
• Form T2125, Statement of Business or Professional Activities
• Guide RC4058, Quick Method of Accounting for GST/HST
• Form GST34, Goods and Services Tax/Harmonized Sales Tax Return for Registrants
• Interpretation Bulletin IT-490, Barter Transactions
• Interpretation Bulletin IT-457R, Election by Professionals to Exclude Work in Progress from Income
• Guide T4011, Preparing Returns for Deceased Persons
• Guide T4037, Capital Gains
• Form T2038(IND), Investment Tax Credit (Individuals)
• Interpretation Bulletin IT-154, Special Reserves
• Interpretation Bulletin IT-442, Bad Debts and Reserves for Doubtful Debts
• Interpretation Bulletin IT-200, Surface Rentals and Farming Operations
• Interpretation Bulletin IT-273, Government assistance - General Comments

Related topics

• Cost of goods sold and gross profit
• Grants, subsidies, and any other incentives or inducements

Date modified:

2017-01-03