In 2025, side hustles have become a major source of extra income for many people in Ontario. Whether you work as a freelancer, drive for a ridesharing business, sell goods online, or provide consulting services, it’s critical to understand how taxes impact your income. By being knowledgeable, you can avoid unpleasant surprises at tax time!
Reporting Income: It’s Not Optional
No matter how much you make from your side business or whether it’s in cash or digital form, you have to disclose it to the Canada Revenue Agency (CRA). Many people look for professional taxation services to make sure they accurately report all of their earnings and steer clear of expensive errors. Ignoring this money is seen as tax evasion and can lead to penalties, interest, or even legal action.
If you are self-employed, you have to file Form T2125 (Statement of Business or Professional Activities) on your personal tax return. All of your revenues and expenses from your side company are listed on this form.
Understanding Self-Employment and HST/GST Obligations
You must open a Harmonized Sales Tax (HST) account and collect HST on your sales if your side business generates more than $30,000 annually. With a few exceptions, this applies to the majority of goods and services.
Registering for HST can be advantageous even if your revenue is below this threshold, as it enables you to collect Input Tax Credits (ITCs) on purchases made for your business.
Also Read:2025 Ontario & Federal Tax Changes: What Businesses Need to Know
Deductible Business Expenses
One big benefit of running a side hustle is the ability to deduct business-related expenses, reducing the amount of tax you owe. Common deductible expenses include:
- Home office costs (portion of rent, utilities)
- Business-related travel and vehicle expenses
- Supplies, equipment, and software
- Marketing and advertising costs
Keeping detailed receipts and organized records is critical. You’ll thank yourself (and your accountant) when tax season arrives!
Managing Canada Pension Plan (CPP) Contributions
As a self-employed individual, you are liable for both the employer and employee portions of CPP contributions, which total 11.9% of your net company revenue, with a maximum contribution of $8,068.20 in 2025. It’s critical to budget for these payments throughout the year to prevent a hefty payment during tax season.
Keeping Accurate Records
Keeping organised records is essential for managing your side hustle’s finances and planning for tax season. Professionals offering tax services often recommend using separate bank accounts for business activities, keeping track of all revenue and spending, and saving receipts and invoices for at least six years, as required by the CRA.
When to Consider Incorporation?
You could think about incorporating your firm if your side hustle is expanding and making a sizable profit. Limited liability protection, possible tax benefits, and improved reputation with customers and suppliers are just a few perks that come with incorporation. However, it’s crucial to balance the benefits and drawbacks of incorporation because it also entails more administrative duties and expenses. Before making this decision, it’s smart to consult experts offering professional taxation services.
Seek Professional Taxation Services
It might be difficult to understand the complexities of side hustle taxation. Hire a reputable taxation firm in Ontario to guarantee tax law compliance and receive personalised counsel. Planning for future development, managing HST responsibilities, and identifying qualifying deductions are all made easier with the help of professional taxation services.
Black Box Consultancy specializes in offering small company owners and side hustlers full tax services. Our knowledgeable staff is committed to assisting you in maximising your profits while adhering to all tax laws. Contact us today to learn how we can support your side hustle’s success.