What You Do (and Don’t) Have to Report as Income

Written By Ronika Khanna

Hello All,

One of my ongoing challenges is defining what it means to be a small business owner.

From a tax perspective, whether you’re a self-employed gig worker, freelancer, independent contractor, or solopreneur, you are essentially seen as a small business. What this effectively means is, if you’re unincorporated, you’ll report your business income and expenses on the T2125 form (statement of business activities) as part of your personal tax return. If incorporated, you’ll file a T2 corporate return.

In addition to small business income, the question arises, what other types of income do you have to report and what is non taxable?

Income You Do Have to Report:

These are all considered taxable and must be included on your return:

  • Self-employment/small business business income - essentially any income that you earn for which you do not receive a T4.

  • Employment income and tips — reported on a T4 if you’re employed.

  • Barter income — even if you exchanged services or goods with no cash involved (though I suspect much of this goes unreported).

  • Rental income — including short-term or informal rentals like Airbnb. (There are special rules and a separate schedule for this.)

  • Investment income — such as interest, dividends, or capital gains earned on regular, non-registered investments, property or other assets.

  • Foreign income — Canadians are taxed on worldwide income. If you earned interest, dividends, business or property income from foreign sources, it must be reported.

  • Retirement income - including CPP/QPP, OAS, private pensions etc.

  • Other income - you also might have to report government benefits (you will receive a tax slip), scholarship income, EI benefits etc.

Income You Don’t Need to Report

There are some situations where you receive money, but it isn’t considered taxable income:

  • Gifts — as long as they’re not tied to work performed. (The rules are different and more complex in the U.S.)

  • Inheritances — these are taxed in the estate before you receive them.

  • Lottery or gambling winnings — unless you gamble professionally or frequently enough that it’s considered a business.

  • Personal loans or transfers between accounts — not considered income.

  • Sale of personal-use property — such as selling used personal items occasionally, but not as a business (e.g. on Facebook Marketplace or Kijiji).

  • GST/HST or QST collected — you’re collecting this on behalf of the CRA or Revenu Québec. It must be reported and remitted, but it’s not counted as income.

  • TFSA earnings — interest, dividends, and capital gains earned in a TFSA are tax-free for life.

  • RRSP income — not taxable until withdrawn in retirement. The income earned inside your RRSP is sheltered.

  • Canada Child Benefit (CCB), GST/HST credits and other tax credits/refunds and life insurance payouts (typically)

If you’re unsure whether a type of income needs to be reported, it’s worth taking a few minutes to find out—often a quick internet search will be sufficient. While many forms of income will come with a tax slip or official document, it is important to note that not all do. That means it’s up to you to make sure you’re reporting correctly.

Not reporting taxable income can lead to substantial penalties.
Conversely, reporting income you don’t need to could mean paying more tax than necessary.

As always, I'd love to hear your thoughts. You can simply reply to this email.

Have a great weekend!

Ronika

Tax Filing webinar

The Small Business Guide to Filing Your T1 Tax Return

If you’re a sole proprietor or unincorporated small business owner (whether or not you’re registered), you’re required to report your business income on your T1 personal tax return. The form you’ll need to complete is the T2125 — and it can be a bit challenging to understand and complete.

👉 Click here to learn more

I’m hosting a live 90-minute webinar on Wednesday, April 2 at 12:00 PM EST to help you better understand your tax return, walk you through how to file it, a review of business data required (and the best way to organize it), and what happens after your file.

You’ll also get:

  • A filled-out sample T2125 (including home office, car expenses and capital cost allowance sections)

  • A downloadable Excel prep template

  • Access to the full recording — even if you can’t attend live

  • A chance to submit your questions in advance or ask them during the webinar

🐦 Early bird pricing is $57 until Sunday
💰 Regular price: $67

And it's tax deductible :)

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Learn More

Related content

Article: Guidance on preparing your T2125 form

Video: 5 Things To Know Before Filing Your Self-Employed Taxes

Video: How to FIND any transaction in QuickBooks Online

Video Playlist: Help with your Small Business/Self Employed Taxes

Thank you to everyone who helped me reach 1,000 subscribers! I really appreciate your support :)

articles of Interest

GST/HST on Sale of Used Condos: If you used airbnb or other short term rental platforms to rent out your place, then you might have to charge the buyer GST/HST when you sell your place, as can be seen in this tax court case.

2025 Quebec Budget Highlights: The budget introduces some changes to the tax credits for R&D, e-businesses and personal taxes. This article provides a fairly thorough summary.

Election 2025 Tax Promises: Curious about each party's tax promises? You can read about them more here.

Powerful "Neuromarketing" Principles: I thought this was a useful Linkedin post that seeks to understand consumer behaviour and frame marketing efforts to leverage it. More importantly, these concepts are fairly easy to implement.

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Ronika Khanna

Ronika Khanna is a Chartered Professional Accountant (CPA), Chartered Financial Analyst (CFA), and the founder of Montreal Financial. Her previous experience includes roles at PwC and ING both in Montreal and Bermuda.

She started her business 15 years ago with a focus on accounting, finance and tax for small business owners, startups, freelancers, and the self-employed. As a small business owner herself, Ronika leverages her firsthand experience to offer practical advice and bring clarity to complex financial concepts.

She has been featured in media outlets such as CBC, the Toronto Star, and The Globe and Mail and has authored several books to help small businesses with their finances.

You can connect with her via her biweekly newsletter, Twitter, YouTube, and Linkedin.

She also offers consultations to small business owners and individuals who want personalized guidance.

https://www.montrealfinancial.ca/about
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