Got a Side Hustle? Don’t Neglect Your Tax Responsibilities!
It’s a fact that many Canadians have had to get creative to make ends meet. This could include taking on a second job, casual one-off tasks, monetizing a hobby, becoming an influencer, renting out a room in their home, or joining the gig economy. According to H&R Block’s 2024 survey, 28% of Canadians have taken on either gig work or other work secondary to their main job to boost their cashflow. And when you earn extra income, the Canada Revenue Agency (CRA) expects to see more money as well in the form of taxes and other contributions.
But the same survey found that a third of gig workers didn’t declare all of their income on their tax return last year. Something that might change their minds is new legislation requiring digital gig and sharing platforms to report a worker’s income to the CRA starting in 2024 and going forward. Examples of those platforms include Uber, DoorDash, Etsy, Airbnb, Fiverr, Rover, and many more. So if your side hustle involves one of these players, the CRA will receive income reports by January 31, 2025, so it’s your responsibility to ensure compliance.
It should go without saying, but any income you earn needs to be included on your tax return. Depending on how you earn the money, it might be reported and taxed differently. A few common examples:
Second Job: If your “side hustle” is a job with another employer, then you probably already have taxes taken off your cheque and reflected on your T4. Include this in your tax return under Employment Income.
One-off Gigs: If you made some extra money through a one-off opportunity like an honorarium for speaking to a class of college students, or working at a booth for a local business at a festival, you should report this under Other Employment Income.
Platform Economy: If you’re earning through a digital platform like those listed above, this is considered Self-Employment Income. You’ll need to fill out Form T2125, Statement of Business or Professional Activities, as part of your tax return. Note that if your gross revenue exceeds $30,000 over four consecutive quarters, you may need to register for and collect GST/HST.
Social Media: If you were paid for sponsored posts on Instagram, offer paid subscriptions on Substack, or accepted products and trips from brands, this is also Self-Employment Income.
The CRA offers an in-depth guide to Taxes and the Platform Economy, dividing platforms into four categories:sharing economy, gig economy, peer-to-peer, and social media influencers, and outlining obligations from income tax to CPP, EI, and GST/HST where applicable. You can find it clicking here.
It’s not all bad news. Along with meeting your tax obligations, there are other benefits to declaring self-employment business income. Along with business income often comes business expenses that can lower your taxable income. You’ll also likely be able to qualify for a larger mortgage or loan based on a higher reported income, and you’ll earn extra RRSP contribution space.
If you’re unsure of your tax obligations, be sure to reach out to a qualified financial professional who can make sure you stay on the right side of the CRA. Tax situations vary, so personalized advice is key.
Wendy Underwood, Lifeform Financial Coaching
As the founder of Lifeform Financial Coaching, Wendy Underwood believes everyone should have the privilege of understanding their finances regardless of their net worth. Lifeform specializes in financial coaching, which is like “personal training for your money,” offering guidance with setting financial goals, improving financial literacy, building a money plan, and providing coaching around behaviours that might be standing in the way of reaching your financial objectives. Wendy holds a Post-Degree Diploma in Financial Planning and is currently an Accredited Financial Counsellor Canada® (AFCC®) candidate with the
Canadian Association for Financial Empowerment (CAFE-ACAF.org)
Connect with Wendy:
LinkedIn: https://www.linkedin.com/in/wendyunderwood/
Instagram: https://www.instagram.com/financialcoaching.ca
TikTok: https://www.tiktok.com/@financialcoaching.ca
Disclaimer: This blogpost provides general information and is not a substitute for professional tax advice. Consult a tax professional for guidance specific to your situation.
