Tax for Builders
Income tax, GST/HST, instalments and deductions, explained without the CRA jargon.
As a self-employed tradesperson the CRA taxes you on your business profit, not your turnover. You report it on a T2125 with your personal T1 return, you may have to register and charge GST/HST, you might pay your tax in instalments through the year, and you can claim a long list of expenses to bring the bill down. Construction has its own wrinkle, the T5018. This hub explains how income tax works across the federal and provincial layers, when you must register for GST/HST, how instalments and the T5018 work, and what you can actually claim. The figures here are for the 2026 tax year (the CRA tax year is the calendar year). Always check the current CRA figures before you file.
Income tax: two layers, federal and provincial
You pay federal income tax plus a provincial or territorial income tax on the same profit. Both run on marginal brackets, so only the slice of income in each band is taxed at that band's rate, and everyone gets a basic personal amount (a slice of income taxed at zero) federally and again provincially. Quebec files its own provincial return through Revenu Quebec on top of the federal one; everywhere else the CRA collects both layers on a single return. As a sole proprietor the profit is taxed in your own hands at these personal rates. If you incorporate, the company pays corporate tax instead, and active business income up to the small business limit (currently $500,000 federally) is taxed at the much lower small business rate. The federal brackets and the basic personal amount are indexed every year, so work off the current figures rather than last year's numbers.
GST/HST: when you have to register
GST/HST is the tax you charge on top of your work. You must register once your taxable revenue passes $30,000 in a single calendar quarter or over four consecutive quarters (the small supplier threshold); below that you can register voluntarily. What you charge depends on the province where the work is supplied: 5 percent GST in Alberta and the territories, HST in the participating provinces (13 percent in Ontario, 14 percent in Nova Scotia, and 15 percent in New Brunswick, Newfoundland and Labrador, and Prince Edward Island), and GST plus a separate provincial sales tax in British Columbia, Saskatchewan, Manitoba and Quebec (where it is the QST). Once registered you add the tax to your invoices, claim back the GST/HST you paid on business purchases (input tax credits), and file returns. Many small trades use the Quick Method to simplify it. Registering is not automatically a win on homeowner work, because private clients cannot claim the tax back, but on commercial jobs where your clients are themselves registered it usually makes sense.
The T5018: construction's extra paperwork
If construction is your main business activity and you pay subcontractors, the CRA requires you to report those payments on a T5018, the Statement of Contract Payments, under the Contract Payment Reporting System. You file a T5018 summary and slips once a year covering what you paid each subcontractor, and the CRA uses it to check that subcontractors declare their income. It does not mean you withhold tax from the subcontractor (you pay them in full); it is a reporting obligation, not a deduction at source. Keep each subcontractor's legal name or business number and the total you paid them across your reporting period and the filing is straightforward. Miss it and the penalties add up per slip.
Instalments: paying tax through the year
If you owe more than $3,000 in net tax in the current year and in either of the two previous years ($1,800 if you live in Quebec) the CRA expects you to pay next year's tax in quarterly instalments instead of one lump at filing. Instalments are due on the 15th of March, June, September and December. The CRA sends instalment reminders with suggested amounts, but you can pay based on your own estimate of this year's income if your trade has slowed down. The safe habit, instalments or not, is to set aside a percentage of every payment the day it lands so the bill is already covered. Pay late or short and the CRA charges instalment interest.
What you can claim, and the deadlines
You only pay tax on profit, so every legitimate business expense lowers the bill: materials and consumables, tools and small equipment, vehicle running costs for business travel, fuel, business insurance, protective clothing and PPE, your phone and data, accounting fees, training and licensing fees, and a portion of home costs if you run the business from home. Bigger purchases such as vehicles and larger plant are not claimed all at once; they are written off over time through Capital Cost Allowance, and passenger vehicles have CRA caps on how much you can claim. For business kilometres you can use the CRA per-kilometre rate, which for 2026 is 73 cents for the first 5,000 km and 67 cents after (check the current rate before you file). Keep the proof, a vehicle logbook plus invoices and receipts for everything else, for at least six years. On dates: your personal return is due 30 April, but if you or your spouse had self-employment income you have until 15 June to file, with any balance owing still due 30 April. No record, no claim.