Line 13500 on Your Tax Return: Self-Employment Income and CPP

Line 13500 on your Canadian T1 tax return is where you report your net self-employment business income for the year. The figure is your profit — gross revenue minus allowable business expenses — not the total your business collected. Sole proprietors and partners in unincorporated businesses use this line, and the number carries over from Form T2125, the Statement of Business or Professional Activities.¹ If you filed under the old numbering system, this is the line formerly known as Line 135; the CRA renumbered it starting with the 2019 tax year.²

What Line 13500 Reports

Line 13500 captures net business income. Its companion, Line 13499, captures the gross figure — the revenue before you subtract anything. Both go on the T1.³ If you operate through a partnership, report only your share of the partnership’s net income, not the whole thing. If the business lost money, you still use Line 13500, showing the loss in brackets.

These two lines are specifically for business income. Other self-employment activities have their own paired lines that work the same way: professional income on 13699/13700, commissions on 13899/13900, farming on 14099/14100, and fishing on 14299/14300.³ Use the correct pair for your activity.

The CRA defines “business” broadly: any trade, profession, or commercial activity carried out for profit.⁴ Revenue from selling goods, providing services, earning commissions, or billing fees all counts. A hobby that occasionally generates money is different, and the distinction matters because business deductions only apply against business income.

How the Number on Line 13500 Is Calculated

Form T2125 does the math. You identify the business at the top (name, business number, six-digit NAICS industry code), then work through revenue and expenses in sequence.¹

Start with gross sales or professional fees, adjusted for returns and allowances. If you sell physical goods, calculate cost of goods sold using opening inventory, purchases, and closing inventory. Gross revenue minus cost of goods sold gives you gross profit. From there, you subtract business expenses, home office costs, and capital cost allowance. What’s left is the figure that transfers to Line 13500.

Deductible Business Expenses

Part 4 of the form is where most self-employed people spend the bulk of their time. Each category has its own line:⁵

Advertising costs for promoting your business
Business insurance premiums (not personal health or life insurance)
Interest and bank charges on loans used for business purposes
Office expenses and day-to-day supplies
Legal and accounting fees
Rent for business premises
Salaries and benefits paid to employees, including your employer CPP and EI contributions
Motor vehicle costs — fuel, insurance, repairs, and lease payments — for the business-use portion
Bad debts that became uncollectible during the year
Utilities, property taxes, and repairs on business property

Every expense must be reasonable and directly connected to earning business income. Mixing personal expenses into business claims is one of the fastest ways to draw a CRA review.

Home Office Deductions

You can deduct a portion of household costs if your workspace is either your principal place of business or a space used exclusively and regularly to meet clients.⁶ Divide the area of your workspace by the total area of your home, then apply that percentage to eligible expenses such as rent, utilities, insurance, and property taxes. If the space also gets personal use, adjust further based on hours per day devoted to business.

One important limit: home office expenses cannot create or increase a business loss. If your business earned $2,000 and your home office costs total $3,000, you claim $2,000 this year and carry the remaining $1,000 forward to a future year, provided you still meet the eligibility conditions.⁶

Capital Cost Allowance

You can’t write off the full price of long-lasting assets like computers, vehicles, or machinery in the year you buy them. Capital cost allowance spreads the deduction over several years based on the asset’s class and depreciation rate.⁷ In the year you acquire an asset, the half-year rule generally lets you claim CCA on only half the net addition to the class. CCA is optional in any given year, so if your income is low, you can skip it and save the deduction for a more profitable year.

Records You Need to Support the Figure

The CRA requires original source documents for every business transaction: sales invoices, cash register receipts, contracts, bank statements, deposit slips, and cheques.⁸ Keep receipts for rent, utilities, advertising, insurance, and anything else you plan to deduct. Don’t send them with your return; keep them organized in case the CRA asks.

If a personal vehicle is used for business, keep a logbook for the entire year recording the date, destination, purpose, and distance of each business trip, plus your total kilometres driven so you can calculate the business-use percentage.⁹ Without the log, the CRA will likely deny or reduce your vehicle claim.

All business records must be kept for six years from the end of the last tax year they relate to.¹⁰ Electronic records are acceptable if they’re readable by CRA software and show enough detail to support your return.

What Reporting on Line 13500 Triggers

CPP Contributions

The amount on Line 13500 drives your CPP calculation, and self-employed individuals pay both the employee and employer portions. For 2026, the base rate is 9.9% plus a first additional enhancement of 2%, for a total self-employed rate of 11.9% on net self-employment income between the basic exemption of $3,500 and the first earnings ceiling of $74,600.¹¹ CPP2 adds a further 8% on earnings between $74,600 and the second earnings ceiling of $85,000.¹²

You work through this on Schedule 8. The tax treatment splits three ways: a non-refundable tax credit on half the base amount (4.95%), a deduction on the other half, and a full deduction on the enhanced and CPP2 portions.¹³ These contributions add up, so factor them into your cash flow before filing.

Filing Deadline and Payment Deadline

Self-employed filers get extra time to file but not extra time to pay. Your T1 is due June 15, but any balance owing must be paid by April 30.¹⁴ If a date falls on a weekend or public holiday, it shifts to the next business day. This split catches people out: you can owe interest on unpaid taxes for six weeks before your return is even due.

Quarterly Instalments

If your net tax owing exceeds $3,000 in the current year and also exceeded $3,000 in either of the two prior years, the CRA expects quarterly instalments rather than a single year-end payment.¹⁵ The threshold is $1,800 for Quebec residents. Due dates are March 15, June 15, September 15, and December 15.¹⁶ The CRA sends reminders with suggested amounts. Missing or underpaying instalments results in instalment interest, so many self-employed people set aside a fixed percentage of each payment received throughout the year.

Late Filing Penalties and Interest

Filing late when you owe money is expensive. The penalty is 5% of the balance owing plus 1% for each full month the return is outstanding, up to 12 months.¹⁷ A return filed a full year late costs 17% of the balance in penalties alone. Repeat offenders face steeper consequences: if you were charged a late-filing penalty in any of the three preceding years and received a formal demand to file, the penalty rises to 10% of the balance plus 2% per month for up to 20 months.

Separately, the CRA charges compound daily interest on any unpaid balance from the day after April 30, at a rate set quarterly.¹⁷ If you can’t pay the full amount by April 30, file on time anyway. That eliminates the late-filing penalty; you’ll still owe interest on the unpaid balance, but that’s a much cheaper problem than interest and penalties stacking together.

1
Canada Revenue Agency. Completing Form T2125
2
Canada Revenue Agency. Sole Proprietorships and Partnerships
3
Canada Revenue Agency. Lines 13499 to 14300 – Self-employment Income
4
Canada Revenue Agency. What Is a Business?
5
Canada Revenue Agency. Expenses Section of Form T2125
6
Canada Revenue Agency. Business-use-of-home Expenses
7
Canada Revenue Agency. Self-employed Business, Professional, Commission, Farming, and Fishing Income – Chapter 4 Capital Cost Allowance
8
Canada Revenue Agency. Business Records
9
Canada Revenue Agency. Motor Vehicle Records
10
Canada Revenue Agency. Where to Keep Your Records, for How Long and How to Request the Permission to Destroy Them Early
11
Canada Revenue Agency. CPP Contribution Rates, Maximums and Exemptions
12
Canada Revenue Agency. Canada Pension Plan (CPP) and the CPP Enhancement
13
Canada Revenue Agency. Businesses, Individuals, and Self-employed – What It Means for You
14
Canada Revenue Agency. Due Dates and Payment Dates – Personal Income Tax
15
Canada Revenue Agency. Required Tax Instalments for Individuals
16
Canada Revenue Agency. Payment Due Dates – Required Tax Instalments for Individuals
17
Canada Revenue Agency. Interest and Penalties on Late Taxes – Personal Income Tax