For more than 20 years in Greater Toronto Brampton and Mississauga Area
Hobby Or Business
If you have a hobby that you like to do for fun, be it collecting and selling rocks, or making art, or giving out boxing lessons, if any of these hobbies generates income for you then you are subject to tax consequences. Everyone has a hobby, its part of natural life but you have to be careful or else you can be in a lot of trouble with the CRA.
Now deciding whether or not you have a business or a hobby is not quite clear cut because you never know what peoples intentions are, but according to the CRA, a business is something you do in pursuit of money while a hobby is something you do but not always for money or profit.
Now a business is required to pay taxes on the profit and can also claim losses/ expenses, but for a hobby on the other hand, you have to pay hobby tax but you cannot claim any expenses or losses. The CRA states that if the hobby is making a profit then you have assumed that it would have but if it generates a loss then you assumed it would have had a loss.
Selling things online on websites such as “eBay” and “Kijiji” are still subject to being taxed just like if you had made a sale at your own store. If you are making a profit then it is subject to tax, however if you are selling old appliances then you are okay because most likely you are taking a loss.
All business that make more than $30,000 must collect HST/GST number and pay that as well, for a hobby, the chances are quite low for the sales to reach $30,000, however if it does the you are required to pay HST/GST.
If your hobby generates a profit, then on your tax return you must fill out a T2125. You should always keep a track of your expenses so that you may understand at the time of the return what is hobby expense and what is your personal expense, which is not claimable with your hobby income. If you feel that your hobby income will continue to grow, then contact your local accountant for insight on the situations.
The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Muhammad Nasrullah and Muhammad Nasrullah CPA Professional Corporation will not be held liable for any problems that arise from the usage of the information provided on this page.
Muhammad Nasrullah,CPA, CGA, LPA
Chartered Professional Accountant
Licensed Public Accountant
206A – 2365 Finch Ave. West North York, ON. M9M 2W8
Tel: (1) 416-748-0817 ext 101 Fax:(1) 416-748-6814
www.nasrullahcga.com E-mail: firstname.lastname@example.org