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What qualifies as business income?


Business income is income you earn from a profession, a trade, manufacture or undertaking of any kind, an adventure or concern in the nature of trade, or any other activity you carry on for profit and there is evidence to support that intention.

For example, income from a service business is business income. Business income does not include employment income, such as wages or salaries received from an employer.


Sources of income

The following are considered sources of income:

  • Bad debts

  • Reserves

  • Vacation trips and awards

  • Government

  • Surface rentals for petroleum or natural gas exploration

  • Rental income

  • Gift cards or certificates – sales

  • Incentive income – pre-loaded credit cards and gift cards

  • Barter transactions

  • Selling a property

  • Lottery prize commissions

How to account for your business income

Business owners have to provide information about their business income and expenses.

Although other types of financial statements are acceptable, we encourage you to use any of the following forms that apply to you:

  • Form T2125, Statement of Business or Professional Activities

  • Form T2042, Statement of Farming Activities

  • Form T2121, Statement of Fishing Activities

  • Form T1163, Statement A – AgriStability and AgriInvest Programs Information and Statement of Farming Activities for Individuals


You also have to record as income any amount credited to your account or set aside for you as payment for providing goods and services. This includes amounts credited to your accounts as offsets against an amount you owe.

You have to support all income entries in your records with original documents like:

  • sales invoices

  • cash register tapes

  • receipts

  • bank deposit slips

  • fee statements

  • contracts

Keep these supporting documents in calendar order or numerical order. Keep them available in case we ask to see them.

You must keep a separate record of your income from all other sources, such as professional fees and income from property, investments, taxable capital gains, estates, trusts, employment, and pensions.



Culled from: https://www.canada.ca/en/revenue-agency/services/tax/businesses/small-businesses-self-employed-income/business-income-tax-reporting/business-income.html

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