Self employed Business, Professional, Commission, Farming, and Fishing Income: Is this guide for you?
Is this guide for you?
Use this guide if you earned income as a:
- sole proprietor (unincorporated, self-employed individual) who is any of the following:
- business person
- commission sales person (this is different from an employee who earns commission)
- daycare in your home
- partner of a:
- partnership who is a business person
- partnership who is a professional
- farming or fishing partnership
It will help you calculate your self-employment income to report on your 2019 income tax return.
Though a trust may be considered an individual, this guide is not for trusts. Do not use this guide if you are a trust or a corporation.
If you are a trust, use guide T4013, T3 – Trust Guide.
If your business is incorporated, use guide T4012, T2 Corporation – Income Tax Guide.
This guide contains tax information for all types of self-employment business income. However, some tax rules are not the same for all types of business. In this document, you will find icons.
The briefcase icon means the information is specific to business and professional income and form T2125, Statement of Business or Professional Activities.
The tractor icon means the information is specific to farming and form T2042, Statement of Farming Activities.
The fish icon means the information is specific to fishing and form T2121, Statement of Fishing Activities.
If you are participating in the AgriStability and AgriInvest programs, you have to use the applicable guide:
- If you are an AgriStability and AgriInvest participant in Quebec, use this guide for your income tax return and contact La Financière agricole du Québec at 1-800-749-3646 about AgriStability and AgriInvest participation.
- If you are an AgriStability and AgriInvest participant in Alberta, Ontario, Saskatchewan, or Prince Edward Island, use guide RC4060, Farming Income and the AgriStability and AgriInvest Programs.
- If you are an AgriStability and AgriInvest participant in the rest of Canada, use guide RC4408, Farming Income and the AgriStability and AgriInvest Programs Harmonized Guide.
You can be a self-employed fisher and also a partner of one or more fishing partnerships. For instance, you may have fished for groundfish by yourself and also have been in a lobster-fishing partnership with your child.
Generally, we consider you to be a self-employed fisher if all of the following applies to you:
- you participate in making a catch
- you are not fishing for your own or another person's sport
- you meet at least one of the following conditions:
- you own or lease the boat that is used to make the catch
- you own or lease specialized fishing gear used to make the catch (not including hand tools or clothing)
- you hold a species licence issued by Fisheries and Oceans Canada, which is necessary to make the catch
- you have a right of ownership to all or part of the proceeds from the sale of the catch, and you are responsible for all or part of the expenses incurred in making the catch. This means you have to pay a predetermined amount or percentage of the expenses, such as fuel, had by the crew in making the catch, regardless of the value of the catch
You are considered to be self-employed if you have a business relationship with a payer and you have the right to determine where, when, and how your work is done. For more information, see guide RC4110, Employee or Self-Employed?
Throughout this guide, we refer to other publications such as guides and forms. Generally, if you need any of these, go to Forms and publications. You may want to bookmark this address for easier access to our website in the future. For more information on archived content of interpretation bulletins, go to What the Archived Content notice means for interpretation bulletins.
What's new for 2019?
New capital cost allowance (CCA) classes: Class 54 (30%) and Class 55 (40%) for business investment in zero‑emission vehicles
Two new capital cost allowance (CCA) classes have been created for zero‑emission vehicles acquired after March 18, 2019, Class 54 and Class 55.
Class 54 has a rate of 30% and includes zero‑emission vehicles that would normally be included in Class 10 or 10.1.
Class 55 has a rate of 40% and includes zero‑emission vehicles that would normally be included in Class 16.
A zero emission vehicle has to be acquired, and become available for use, after March 18, 2019, and before 2028 to be eligible for the first year enhanced CCA deduction. These new classes will have an enhanced first year CCA deduction of 100% for zero-emission vehicles that become available for use before 2024. CCA will still be calculated on a declining balance basis, and a phase out will begin for property that becomes available for use after 2023.
For more information, see Classes of depreciable property.
Change in use rules for part of property such as multi-unit residential properties
Under proposed legislation, a taxpayer can elect that the deemed disposition that normally arises on a change in use of part of a property not apply in respect of changes in the use of property that occur on or after March 19, 2019. As a result, any accrued capital gain on the property can be deferred until the property is disposed of in the future. For more information, see guide T4037, Capital gains.
Accelerated investment incentive property (AIIP) – Property that is eligible for an enhanced first year allowance that is subject to the capital cost allowance (CCA) rules. The property may be eligible if it is acquired after November 20, 2018, and becomes available for use before 2028. For more information on AIIP, go to Accelerated Investment Incentive.
Arm's length – refers to a relationship or a transaction between persons who act in their separate interests. An arm's length transaction is generally a transaction that reflects ordinary commercial dealings between parties acting in their separate interests.
"Related persons" are not considered to deal with each other at arm's length. Related persons include individuals connected by blood relationship, marriage, common-law partnership or adoption (legal or in fact). A corporation and another person or two corporations may also be related persons.
"Unrelated persons" may not be dealing with each other at arm's length at a particular time. Each case will depend upon its own facts. The following criteria will be considered to determine whether parties to a transaction are not dealing at arm's length:
- whether there is a common mind which directs the bargaining for the parties to a transaction
- whether the parties to a transaction act in concert without separate interests; "acting in concert" means, for example, that parties act with considerable interdependence on a transaction of common interest
- whether there is de facto control of one party by the other because of, for example, advantage, authority or influence
For more information, see Income Tax Folio S1-F5-C1, Related persons and dealing at arm's length.
- the time the property is first used by the claimant to earn income
- the time the property is delivered or is made available to the claimant and is capable of producing a saleable product or service
For more information, see Available-for-use rules.
- the purchase price (not including the cost of land, which is not depreciable)
- the part of your legal, accounting, engineering, installation, and other fees that relate to buying or constructing the property (not including the part that applies to land)
- the cost of any additions or improvements you made to the property after you acquired it, if you did not claim these costs as a current expense (such as modifications to accommodate persons with disabilities)
- for a building, soft costs (such as interest, legal and accounting fees, and property taxes) related to the period you are constructing, renovating, or altering the building, if these expenses have not been deducted as current expenses
Capital cost allowance (CCA) – you may have acquired depreciable property like a building, furniture, or equipment to use in your business. You cannot deduct the initial cost of these properties in the calculation of the net income of the business or professional activities of the year. However, since these properties wear out or become obsolete over time, you can deduct the cost over a period of several years. This deduction is called CCA.
Depreciable property – the property on which you can claim CCA. It is usually capital property from a business or property. The capital cost can be written off as CCA over a number of years. You usually group depreciable properties into classes. Diggers, drills, and tools that cost $500 or more belong in Class 8. You have to base your CCA claim on the rate assigned to each class of property.
Fair market value (FMV) – generally, the highest dollar value you can get for your property in an open and unrestricted market between an informed and willing buyer and an informed and willing seller who are dealing at arm's length with each other.
Motor vehicle – an automotive vehicle designed or adapted for use on highways and streets. A motor vehicle does not include a trolley bus or a vehicle designed or adapted to be operated only on rails.
However, a non-arm's length relationship might also exist between unrelated individuals, partnerships or corporations, depending on the circumstances. For more information, see the definition of arm's length.
Passenger vehicle – a motor vehicle that is owned by the taxpayer (other than a zero-emission vehicle) or that is leased, and is designed or adapted primarily 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.
Passenger vehicles and zero-emission passenger vehicles are subject to limits on the amount of CCA, interest, and leasing costs that may be deducted. They do not include:
- an ambulance
- a clearly marked police or fire emergency response vehicle
- a motor vehicle you bought to use more than 50% as a taxi, a bus used in the business of transporting passengers, or a hearse used in a funeral business
- a motor vehicle you bought to sell, rent, or lease in a motor vehicle sales, rental, or leasing business
- a motor vehicle (except a hearse) you bought to use in a funeral business to transport passengers
- a van, pick-up truck, or similar vehicle that seats no more than the driver and two passengers and that, in the tax year you bought or leased it, was used more than 50% to transport goods and equipment to earn income
- a van, pick-up truck, or similar vehicle that, in the tax year you bought or leased it, was used 90% or more to transport goods, equipment, or passengers to earn income
- a pick-up truck that, in the tax year you bought or leased it, was used more than 50% to transport goods, equipment, or passengers to earn or produce income at a remote work location or at a special work site that is at least 30 kilometres from the nearest community with a population of at least 40,000
- a clearly marked emergency medical service vehicle used to carry paramedics and their emergency medical equipment
Proceeds of disposition – the amounts you receive, or that we consider you to have received, when you dispose of your property (usually the selling price of the property). Proceeds of disposition is also defined to include, amongst other things, compensation received for property that has been destroyed, expropriated, damaged, or stolen.
Zero-emission passenger vehicle (ZEPV) – means an automobile that is owned by the taxpayer and is included in Class 54 (but would otherwise be included in Class 10 or 10.1). The rules that apply to the definition of passenger vehicles apply to zero-emission passenger vehicles (ZEPVs). A ZEPV does not include a leased passenger vehicle, but other vehicles that would otherwise qualify as a ZEPV if owned by the taxpayer, are subject to the same leasing deduction restrictions as passenger vehicles.
- is a plug-in hybrid with a battery capacity of at least 7kWh or is either fully:
- powered by hydrogen
- is acquired, and becomes available for use, after March 18, 2019, and before 2028
- has not been used for any purpose before it was acquired by the taxpayer
- is a vehicle for which:
- an election has not been made to forgo the Class 54 or 55 treatment
- assistance has not been provided by the Government of Canada under the new incentive announced on March 19, 2019
- an amount has not been deducted as CCA and a terminal loss has not been claimed by another person or partnership
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