Guides
How the CRA treats income from clothing repair work
Clothing repair income is taxable business income in Canada, and the CRA wants it reported on the T2125 with receipts, expenses and GST/HST tracked.
What to take away
- Clothing repair income counts as business income when you mend for profit, regularly and with a reasonable expectation of profit, so the CRA expects it reported.
- You report it on the T2125 form filed with your personal return, and you can claim materials, tools, space and other costs against the revenue.
- You must register for GST/HST once your taxable supplies exceed the $30,000 small supplier threshold over four consecutive calendar quarters.
- Receipts and records back every expense and income line, and the CRA can ask to see them for up to six years.
- Deadlines and instalments depend on your business structure, so the filing calendar matters as much as the bookkeeping.
Is clothing repair income business or hobby income under CRA rules?
The CRA draws a line between a hobby and a business. A hobby is something you do for pleasure, with no real plan to profit. A business is an activity you carry on for profit, and the CRA looks at whether you treat it that way.
If you mend clothes for neighbours, charge for the work and intend to keep earning, you are running a business.
The test is not the size of the income. It is whether you have a reasonable expectation of profit and whether you pursue it in a businesslike way. Keeping records, setting prices, advertising and tracking costs all point toward business income. A one-off favour for a friend usually does not.
Intent matters, but so does pattern. If you take in repairs most weeks, hold a separate bank account and list your services publicly, the CRA will treat the income as business income. That means it is fully taxable and reported on your return.
Even a small side operation counts once it is commercial. You do not need a storefront or a registered company to be self-employed. A mender working from a kitchen table in Halifax or Winnipeg is in the same category as one renting space in Toronto.
The distinction changes what you can claim. Hobby expenses are generally not deductible, while business expenses are. That is why the classification matters more than the dollar figure. For a fuller picture of what repair work can earn, see our guide to clothing repair pricing.
What makes repair work a business
Several factors push an activity toward business status. You sell a service to the public. You set your own hours and prices. You carry the risk of loss. You keep records. You expect the activity to make money over time. A combination of these points is what the CRA weighs.
What keeps it a hobby
A hobby usually has no profit motive, no regular customers and no bookkeeping. You might mend for family, sell the odd repaired item or teach a friend. Once money changes hands on a repeated basis, the hobby argument gets weaker.
Reporting repair revenue on the T2125 and your income tax return
Self-employed menders report business income on form T2125, the Statement of Business or Professional Activities, filed with your personal T1 return. The form captures your gross revenue, your expenses and your net income, and that net figure flows into your return.
The CRA's income tax rules for self-employed filers cover both the form and the deductions that go with it.
The T2125 asks for your business name, your industry and your fiscal period. For most sole proprietors the fiscal period is the calendar year. You report revenue when you earn it, not when a customer finally pays, unless you have chosen a different method.
Revenue means everything you take in for repair work. That includes hemming, zip replacements, patch jobs, alterations and any related service. It also includes tips and any deposits you keep when a customer cancels. Report the full amount before expenses.
You can find the form and its guide through the CRA's library of CRA forms and publications. The guide that accompanies the T2125 walks through each line, which helps if this is your first year filing repair income.
If you run the business through a corporation, the reporting path is different. A corporation files a T2 return and pays corporate tax. Most solo menders start as sole proprietors, which is simpler and uses the T2125.
Where the net income goes
Your net business income is added to your other income and taxed at your marginal rate. It also affects items tied to net income, such as some credits and benefit calculations. That is why under-reporting can create problems beyond the tax itself.
Why the CRA wants a business number
You may need a business number for GST/HST, payroll or import accounts. A business number is not the same as incorporation. Many sole proprietors hold one simply because they registered for GST/HST.
Expense categories for a clothing repair business: materials, tools, space
Expenses reduce the income you pay tax on, but only when they are incurred to earn business income. The CRA expects you to separate personal and business use, especially for costs that serve both. Keep the categories clear and consistent from year to year.
Materials are the most obvious cost. Thread, zips, buttons, interfacing, patches, elastic and fabric for repairs all count. So do needles, bobbins and the small consumables that disappear quietly over a year of mending. Notes on materials and time double as documenting a garment for a quote or an insurance claim.
Tools and equipment are handled differently. A pair of scissors or a seam ripper is a current expense. A sewing machine, serger or industrial iron is usually a capital asset, claimed over several years through capital cost allowance rather than all at once.
Space can be claimed if you use part of your home for the business. The claim is based on the share of square footage used and must be reasonable. A dedicated corner of a basement is easier to defend than the family dining table.
Other categories include insurance for the business, advertising, website hosting, bank fees on a business account, shipping for mail-in repairs and professional fees. Vehicle costs count when you drive to fittings, suppliers or markets, tracked by kilometres for business.
| Expense category | Examples | How it is usually claimed |
|---|---|---|
| Materials | Thread, zips, buttons, patches | Full cost in the year purchased |
| Small tools | Scissors, seam rippers, needles | Full cost in the year purchased |
| Equipment | Sewing machine, serger, iron | Capital cost allowance over time |
| Home workspace | Share of heat, hydro, rent | Percentage of square footage used |
| Business overhead | Insurance, hosting, advertising | Full cost if business only |
| Vehicle | Supplier and fitting trips | Business kilometres as a share of total |
For menders building a studio rather than working from home, the cost mix shifts toward rent, utilities and insurance. Our piece on running a small clothing repair studio covers how those overheads behave as a business grows.
Mixed-use costs
A phone, a computer or a vehicle used for both life and work needs an allocation. Pick a defensible percentage and apply it consistently. The CRA accepts reasonable splits, not guesses that change whenever they help.
Costs you cannot claim
Personal clothing, ordinary dry cleaning and your own wardrobe repairs are not business expenses. Fines, most meals without a business purpose and capital improvements claimed as repairs also fail the test.
GST/HST thresholds and when to register for repair services
GST/HST applies to most repair services in Canada. The rate depends on the province, with GST in Alberta and the territories, and HST in Ontario, Nova Scotia, New Brunswick, Newfoundland and Labrador and Prince Edward Island. Quebec runs its own QST alongside GST.
A small supplier does not have to register. The threshold is $30,000 in taxable supplies over four consecutive calendar quarters. Once you cross it, you must register, charge the tax and file returns. The count includes all your taxable sales, not just repair work.
Registration is optional below the threshold. Some menders register early to claim input tax credits on equipment and materials. Others stay unregistered to keep pricing simple for customers. Both are legitimate choices.
If you register, you charge GST/HST on your repair invoices and remit what you collect, minus the tax you paid on business purchases. That subtraction is the input tax credit, and it is why registration can pay off in a year with a large equipment purchase.
The CRA's guidance on GST/HST for businesses sets out registration, collection and filing. It is the starting point if you are unsure whether your supplies are taxable.
When the threshold is crossed
Crossing the threshold does not mean registering that day. You have a short window after the quarter in which you exceed it. Miss the window and you may owe tax you never charged a customer.
Charging tax on quotes
Once registered, your quotes should show the tax separately. Customers comparing prices need to see the same base rate. It also keeps your invoices clean for your own records.
Receipt requirements and records the CRA expects from menders
Every expense you claim needs support. A receipt shows the supplier, the date, the amount and what was bought. A bank or card statement alone proves payment, not the purpose, so pair it with the receipt where you can.
Income records matter just as much. Keep your invoices, your sales summaries and your deposit records. If you take cash, record it. Cash that never appears in your books is the fastest way to a reassessment.
Digital copies are acceptable. A clear photo or PDF of a paper receipt is generally fine, as long as it is legible and stored safely. Keep the originals for the years the CRA can review.
For repair work, note the garment and the job on the invoice. That detail links the revenue to the service and helps if a customer disputes a charge later. It also supports your expense claims when materials are bought for specific jobs.
Checklist for a repair business record system:
- Separate business bank account or a clearly labelled personal account
- Numbered invoices showing customer, garment, service and amount
- Receipts filed by month for materials, tools and overheads
- Mileage log for supplier, fitting and market trips
- Home office square footage noted once and kept on file
- Digital backups of every receipt and invoice
- GST/HST collected and input tax credits tracked separately
If a customer asks why a repair costs what it does, the same records help you answer. Clear notes about materials and time also make it easier to brief a professional if you ever subcontract a difficult job.
How long to keep records
The CRA generally expects records kept for six years from the end of the tax year they relate to. If you file late or are under review, the clock can run longer. Digital storage makes this cheap, so there is little reason to purge early.
What a weak record looks like
A shoebox of faded receipts with no dates, a bank statement with no matching invoice and a mileage number pulled from memory are all weak. Each one invites questions you then have to answer under pressure.
Filing and paying: GST/HST returns, instalments and deadlines
Your T1 return and T2125 are due by the end of April following the tax year. If you or your spouse carry on a business, the filing deadline extends to mid June, but any balance owing is still due at the end of April. Interest runs from that April date.
GST/HST returns depend on your reporting period. Small businesses often file annually, quarterly or monthly. The CRA assigns a reporting period when you register, and you can request a change if your revenue shifts.
Instalments apply when your net owing is high enough across the year. The CRA sends notices when quarterly instalments are expected. Paying them avoids a lump sum in April and the interest that comes with it.
Payments go to the CRA through online banking, a payment service, mail or in person at a financial institution. The CRA's page on payments to the CRA lists the accepted methods and the details each one needs.
Late filing carries penalties, and repeated late filing costs more. Interest compounds daily on unpaid balances. Setting a calendar reminder for each deadline is cheaper than paying the penalty.
Choosing a reporting period
Annual filing suits a small mender with steady revenue. Quarterly or monthly filing suits businesses that want input tax credits back sooner or that expect to owe tax regularly. Match the period to your cash flow.
Setting money aside
Put a share of each payment into a separate account for tax. The percentage depends on your bracket and your GST/HST registration, but the habit keeps April from becoming a crisis.
Keeping records that survive a CRA review of clothing repair work
A review is usually a request for documents, not an accusation. The CRA picks files for many reasons, including random selection and industry patterns. What decides the outcome is whether your records match your return.
Start with a system you will actually use. A folder per month for receipts, a spreadsheet for income and expenses, and a yearly summary that ties to your T2125. If the system is too elaborate, it collapses by March.
Reconcile once a month. Compare your invoices to your bank deposits and note any gaps. Catching a missing payment in February is easy. Reconstructing a year of cash jobs in an audit is not.
Keep business and personal spending apart. A dedicated account and card makes the split obvious and removes the need to justify every transaction. It also speeds up the bookkeeping you do at year end.
Understand the rules that apply to your situation. The Canada.ca taxes hub links to the income tax, GST/HST and payment guidance you need. Reading it once a year is enough to stay current.
What to hand over if asked
Expect to provide invoices, receipts, bank statements, mileage logs and your GST/HST records. Provide what is requested, in the format requested, and keep a copy of everything you send. Do not volunteer unrelated documents.
Fixing past mistakes
The voluntary disclosure programme lets you correct missed income or unremitted tax with reduced penalties if you come forward before the CRA contacts you. It is worth using if you realize a prior year was wrong.
Common questions
Do I need to register for GST/HST if I only mend part time? Only if your taxable supplies exceed $30,000 over four consecutive calendar quarters. Below that you are a small supplier and registration is optional. Part-time status does not change the threshold.
Can I claim my sewing machine as an expense in one year? Usually not. Equipment is treated as a capital asset and claimed over several years through capital cost allowance. Small tools under the capital cost rules can be claimed in full.
What if I take cash and do not issue invoices? The income is still taxable. Record the cash, keep a sales summary and report it on the T2125. Unrecorded cash is the most common problem found in reviews of repair businesses.
How long should I keep repair receipts? Six years from the end of the tax year they relate to, as a general rule. Keep them longer if you filed late or are under review. Digital copies are acceptable if they are legible.
Does a home workspace claim trigger a capital gains problem? It can if you claim depreciation on the space or use it exclusively for business. Many menders claim only the running costs, such as a share of heat and hydro, to avoid that issue.
What happens if I miss the GST/HST registration deadline? You may owe tax you never charged, plus interest and penalties. Register as soon as you realize, and correct the affected returns. Acting before the CRA contacts you usually reduces the cost.
For a sense of which jobs bring in the most revenue per hour, our weekend plan on repairs that save money is a useful place to start.