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Tax Tips for Side Hustles
By Minerva C
Tax Tips for Side Hustles
Side Hustle Income Is Taxable

Side Hustle Income Is Taxable

Many people mistakenly believe that small side jobs do not need to be reported. However, the Canada Revenue Agency (CRA) requires individuals to report all income earned—including side hustles and freelance work.

This includes income from activities such as:

  • Freelance work
  • Consulting services
  • Online product sales
  • Rideshare driving
  • Rental income
  • Digital content creation

Even if you earn only a few thousand dollars, it must be included on your tax return.

Determine If You Are Self-Employed

Determine If You Are Self-Employed

If you earn money independently rather than as an employee, you are likely considered self-employed under Canadian tax law.

Self-employed individuals report their income using Form T2125 (Statement of Business or Professional Activities) as part of their tax return.

This form allows you to calculate your business income, deduct eligible expenses, and determine your taxable profit.

Track Every Dollar You Earn

One of the biggest mistakes side hustlers make is failing to track their income and expenses properly.

To stay organized:

  • Keep digital copies of receipts
  • Use accounting software or spreadsheets
  • Separate personal and business bank accounts
  • Record every transaction

Good bookkeeping ensures accurate reporting and makes tax filing much easier.

Claim Eligible Business Expenses

Claim Eligible Business Expenses

One advantage of a side hustle is the ability to deduct legitimate business expenses. These deductions reduce your taxable income.

Common deductible expenses include:

  • Advertising and marketing
  • Office supplies
  • Internet and phone costs
  • Vehicle expenses for business use
  • Home office expenses

For example, if you operate a small online business from your home in Toronto or Mississauga, you may be able to deduct a portion of your rent, utilities, or internet expenses if they are used for business purposes.

Understand GST/HST Requirements

Understand GST/HST Requirements

Depending on your income level, you may need to register for GST/HST.

If your business revenue exceeds $30,000 in a 12-month period, you are generally required to register for GST/HST and begin collecting it on taxable sales.

Many side hustlers reach this threshold faster than expected, especially those working in digital services or consulting.

Prepare for CPP Contributions

Prepare for CPP Contributions

Self-employed Canadians must contribute to the Canada Pension Plan (CPP) on their business income. Unlike employees who share CPP contributions with employers, self-employed individuals pay both portions themselves.

For 2025, the CPP contribution rate for self-employed individuals is 11.9% on eligible income, up to the yearly maximum.

Planning for this expense prevents unpleasant surprises at tax time.

Make Sure Your Extra Income is Structured Efficiently

Make Sure Your Extra Income is Structured Efficiently

Book a session with Bailey Tax Services to make sure your extra income is structured efficiently and working in your favor.

BOOK A SESSION TODAY!

Work With a Tax Professional

Final Thoughts

Work With a Tax Professional

Managing a side hustle while working a full-time job can be challenging. Professional tax advisors help side hustlers:

  • Maximize deductions
  • Stay compliant with CRA rules
  • Plan tax strategies throughout the year
  • Reduce stress during tax season

For entrepreneurs and freelancers in Toronto, Mississauga, Brampton, and Etobicoke, working with a knowledgeable tax professional ensures that side hustle income supports long-term financial growth rather than creating unexpected tax problems.

Final Thoughts

Side hustles offer Canadians incredible opportunities to earn additional income and build new careers. However, proper tax planning is essential to make the most of these opportunities.

By tracking income, claiming legitimate deductions, and understanding CRA requirements, Canadians across the GTA can turn their side hustles into successful and financially sustainable ventures.

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