Guide T4002: Self-employed tax help for Canadian businesses

Published Monday 22 December 2025

Table of contents

• What is Guide T4002?
• Who should use Guide T4002?
• How to access Guide T4002
• What the T4002 covers
• A closer look at the details
• Make tax time easier with the right tools
• FAQs on Guide T4002

Key takeaways

• Download Guide T4002 from the CRA website to access comprehensive instructions for reporting self-employment income, including specific guidance for sole proprietors, partners, commission salespeople, farmers, and fishers.
• Complete Form T2125 using the detailed chapter-by-chapter instructions in Guide T4002, which covers income reporting, expense deductions, capital cost allowance, and loss reporting for different business types.
• Maintain organized records throughout the year and claim all eligible business expenses such as home office costs, vehicle expenses, professional fees, and equipment depreciation to maximize your tax deductions.
• Register for GST/HST when your business revenue exceeds $30,000 in any calendar quarter or year, and consider using accounting software to track income and expenses in real-time for easier tax preparation.

What is Guide T4002?

Guide T4002 is the Canada Revenue Agency's official tax guide for self-employed Canadians. It helps you report self-employment income and complete your business taxes accurately.

This guide is officially called T4002 Self-employed Business, Professional, Commission, Farming, and Fishing Income. It's regularly updated by the CRA to reflect current tax rules.

Who should use Guide T4002?

Guide T4002 is for unincorporated Canadian businesses, meaning it is designed for self-employed individuals in Canada. This includes a wide range of business owners and professionals who are not incorporated.

You should use this guide if you're a:

• Sole proprietor: Self-employed person running a business or professional practice
• Commission salesperson: Earning income through sales commissions
• Home daycare provider: Providing childcare services in your home
• Farmer or fisher: Operating farming or fishing operations
• Partnership member: Partner in a business, professional, farming, or fishing partnership

The guide helps you navigate the specifics of reporting income and expenses for these types of self-employment activities.

How to access Guide T4002

You can download the most current version of Guide T4002 from the Government of Canada website at any time. You can view it online or save the PDF to use or print later for your records.

What the T4002 covers

Guide T4002 contains six main chapters that cover everything you need to report self-employment income:

• General information: Record keeping, deadlines, and basic requirements
• Income reporting: How to complete tax forms for different business types
• Expense deductions: What business costs you can claim
• Capital cost allowance: Depreciation rules for business assets
• Loss reporting: How to handle business losses
• Capital gains: Special rules for farmers and fishers

The guide also includes definitions and highlights specific information for professional services, farming, and fishing operations.

A closer look at the details

If you plan to complete your own business income tax return, Guide T4002 will help you find information relevant to you. It will also help you determine what's important.

Chapter 1: General information

Chapter 1 covers the fundamentals you need to get started with business tax reporting:

• Business qualification: What activities count as a business for tax purposes
• Income recognition: How to identify and report different types of business income
• Modern assets: Reporting requirements for gift cards, certificates, and crypto-assets
• Record keeping: What documents you must maintain and how to organize them
• Key deadlines: Filing dates, installment payments, and balance owing dates

Chapter 1 explains what activities count towards farming income. It also has specific information on what are not considered farming activities, such as raising animals to be sold as pets.

This section of the guide lays out how to report your self-employment income. It provides information on when you must begin reporting your income and deducting expenses.

Chapter 1 also covers these essential tax requirements:

• Important dates: Filing deadlines, installment payment dates, and balance owing dates
• Accounting methods: Who can use cash method versus accrual method reporting
• Record keeping: What business records you must maintain and storage requirements
• Installment payments: When self-employed individuals must make quarterly payments
• GST/HST registration: Requirements for businesses earning over $30,000 annually

You must register for Goods and Services Tax (GST) and Harmonized Sales Tax (HST) when your business revenue exceeds $30,000 in any calendar quarter or year. Note that home daycare providers are usually exempt if they care for children under 14 for less than 24 hours a day.

Chapter 2: Income

Chapter 2 shows you exactly which tax forms to complete based on your business type:

• Sole proprietors: Use Form T2125 for business, professional, farming, or fishing income
• Partnerships: Different forms required depending on partnership structure
• Multiple income types: Separate T2125 forms needed for each income source

Next, Chapter 2 advises how to fill in:

Part 1: Identification

This section includes your CRA account number and industry codes. This is also where you fill in your partnership business number (if you have one) and your Social Insurance Number.

As of June 17, 2024, there's an update for individuals with a SIN that starts with 9, who can now use the Business Registration Online service to instantly get a business number and a GST/HST account. Finally, if you have a tax shelter identification number, fill it in here.

Part 2: Internet business activities

Fill out this section if your business earns income from web pages or websites. For example, if you sell goods online, offer online booking or sell advertising on your sites, complete Part 2.

Part 3: Income

This is filled out if you have business income or professional income. Part 3A is only filled out for business income. Part 3B is filled out if you have professional income. If you have both business and professional income, you fill in a separate Form T2125 for each. Part 3 then goes into gross income, including gross business or professional income. It also discusses cost of goods sold, and farming and fishing income.

Chapter 3: Expenses

Chapter 3 explains which business expenses you can deduct to reduce your taxable income. You can generally deduct expenses incurred to earn business income, whether already paid or payable.

The chapter covers two main expense types:

• Current expenses: Day-to-day operating costs you can deduct immediately
• Capital expenses: Major purchases that must be depreciated over time

Part 4: Net income (or loss) before adjustment

Part 4 explains which expenses you can deduct. Deductions include mortgage interest, business licence fees, and property taxes. They also include professional fees, office expenses, repairs, and maintenance. Finally, they include some passenger vehicle costs, such as leasing costs and motor vehicle expenses.

Part 4 also explains that you can use input tax credits for GST and HST if applicable. If you are claiming motor vehicle expenses, this section outlines which records you must keep.

Part 5: Your net income (or loss)

Part 5 includes a line for entering business-use-of-home expenses. It also describes the details you need to provide about partners if you are part of a partnership.

Chapter 4: Capital Cost Allowance (CCA)

Chapter 4 covers capital cost allowance (CCA), which is how you deduct the cost of business assets over time:

• What qualifies: Equipment, building alterations, and other depreciable property
• Calculation methods: How to determine your annual CCA claim
• Asset disposal: How to handle proceeds when you sell or dispose of assets
• Property classes: Different depreciation rates for buildings, equipment, and other assets; for instance, new purpose-built rental housing constructed after April 16, 2024, may benefit from an accelerated 10% capital cost allowance (CCA) rate.

Chapter 4 defines CCA (depreciation) and the classes of depreciable property. Buildings may belong to Class 1, 3 or 6 depending on the materials in the building and the date of purchase. Other property belongs in different classes, depending on the type of property it is.

Chapter 4 also explains how to handle special situations. Special situations include personal use of property, grants and capital gains.

Chapter 5: Losses

Chapter 5 explains how to report business losses and carry them forward or back to reduce taxes in other years:

• Farm losses: Rules for fully deductible versus restricted farm losses
• Fishing losses: How to claim and carry forward fishing operation losses
• Business losses: Non-capital losses from other business activities
• Loss carryover: How to apply losses against income in other tax years

Chapter 6: Capital gains

This chapter covers capital gains for people who farm or fish. (General capital gains rules are covered in Guide T4037, Capital Gains.)

Such capital gains include disposing of farmland that includes your personal residence. For these types of properties, it's important to be aware of recent changes from Budget 2024, where the lifetime capital gains exemption will increase to $1.25 million for the sale of farming and fishing property, effective June 25, 2024. Chapter 6 also explains how to calculate capital gains and other special capital gains rules.

Make tax time easier with the right tools

Understanding Guide T4002 is a great first step, and the right tools can make gathering your figures much easier. This is where the right tools make a real difference.

There are also government initiatives, such as a new refundable tax credit that returns pollution pricing proceeds to small and medium-sized businesses. Online accounting software helps you track income and expenses throughout the year, so you're not scrambling when it's time to file.

With organized, real-time financial data, you can confidently fill out your tax forms and focus more on running your business. If you're ready to simplify your bookkeeping and make tax season less stressful, explore how Xero can help. Try Xero for free today.

FAQs on Guide T4002

Here are answers to some common questions about Guide T4002 and self-employment taxes.

What is the difference between T2125 and T4002?

Think of T4002 as the instruction manual and T2125 as the form you fill out. Guide T4002 provides detailed information to help you understand how to report your self-employment income. Form T2125, Statement of Business or Professional Activities, is the actual form where you calculate and report that income and your related expenses.

How do I prove self-employment income to the CRA?

To prove your self-employment income, you need to keep clear and organized records. Key documents include your tax returns, CRA notices of assessment, business bank statements, invoices you've sent to clients, and contracts or agreements for your work. Keeping these records in order is crucial for verification.

How do I get the biggest tax refund when self-employed?

To maximize your refund, it's important to claim all the business expenses you're entitled to. This includes everything from home office expenses and vehicle mileage to supplies and professional fees. Diligent record-keeping throughout the year ensures you don't miss any potential deductions.