Business or Hobby

by Independent Consultant
(Canada)

When does a hobby become a business in CRA's eyes?

I have started as an independent consultant with a direct sales company as a hobby.

I have made no income. When must I start claiming as a business on my taxes?

Check out what CRA's publication IT-334R2 Miscellaneous Receipts:

Hobbies

11. In order for any activity or pursuit to be regarded as a source of income, there must be a reasonable expectation of profit. Where such an expectation does not exist (as is the case with most hobbies), neither amounts received nor expenses incurred are included in the income computation for tax purposes and any excess of expenses over receipts is a personal or living expense, the deduction of which is denied by paragraph 18(1)(h). On the other hand, if the hobby or pastime results in receipts of revenue in excess of expenses, that fact is a strong indication that the hobby is a venture with an expectation of profit; if so, the net income may be taxable as income from a business. The current version of IT-504, Visual Artists and Writers, discusses the concept of "a reasonable expectation of profit" in greater detail. Where a hobby consists of collecting personal-use property or listed personal property, dispositions should be accounted for as described in the current version of IT-332, Personal-Use Property.

Comments for Business or Hobby

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Mar 24, 2012

Is there a minimum profit amount?
by: Website Developer

I have a very small home business of developing websites.

This past tax year, I did not do any developing but did earn a small amount for hosting (approx. $200).

Is there a minimum amount I can make and not have to declare on my tax return?

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You must declare all income, however see the above post on miscellaneous receipts.

Remember also, that as a business, you get to deduct your business expenses incurred to earn your revenue. This means you are taxed on your profit.

May 04, 2017

Hobby Business
by: Anonymous

Do you need a business number from the CRA when you have a hobby business for filling out T2125 slip?

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