Updated Checked by the Tax-Services.ca editorial team How we check
Yes. In Canada, tips are taxable income whether they arrive as cash, on a card or through a tip pool. As an employee you report them on your tax return even when they are not on your T4. If you are self-employed, tips are part of your business income.
How do you report tips as an employee?
Tips your employer pays you or reports show up on your T4. For tips and gratuities that are not on a T4 slip, the CRA’s page on other employment income says to enter the total on line 10400 of your return, together with any occasional earnings. The same page says it is your responsibility to keep track of what you earn through your job.
How are tips taxed if you are self-employed?
If you run your own business, such as a hairstylist who rents a chair or a delivery driver working for yourself, tips are part of your business income, reported with your other sales. They are taxed after your business expenses come off, like the rest of your profit.
Do tips affect CPP and EI?
It depends on who controls the tips. The CRA separates two kinds.
- Controlled tips are tips the employer controls or holds and then pays to the employee, for example tips pooled and paid out through payroll. The CRA treats them as paid by the employer, so CPP contributions and EI premiums are deducted at source.
- Direct tips are paid by the customer straight to the employee. No CPP contributions or EI premiums apply to them, and they remain taxable.
Say a server gets $60 in direct cash tips and $40 from a pool paid out on the pay cheque. All $100 is taxable income. Only the $40 counts toward pensionable and insurable earnings. An employee in pensionable employment can choose to pay CPP on direct tips by filling out Form CPT20.
What records should you keep?
Write down your tips each shift, along with any tip-out you pay to coworkers, so you can back up the total on your return. A simple notebook or phone note with the date and amount is enough. Our tax return documents checklist shows what else to gather, and the tax slips decoder explains the boxes on your T4.
For other payments, see the table on Is it taxable?, the income tax calculator and the self-employed tax calculator.
Where does this information come from?
The rules come from the Canada Revenue Agency pages Line 10400, other employment income and Tips and gratuities. Check the CRA page for your case. Checked in October 2026. This is an independent information site: we provide no services, we do not represent the CRA or any organization, and we do not guarantee that anything here is accurate or current. We accept no liability for decisions based on it. Check the official source before you rely on it. See the full disclaimer.
Frequently asked questions
Do I have to report cash tips in Canada?
Yes. Tips are taxable income even when you are paid in cash. If they are not on your T4, the CRA says to enter the total of your tips, gratuities and occasional earnings on line 10400 of your return. Keep a simple log of each shift.
Are tips subject to CPP and EI?
Controlled tips, which the employer holds and then pays out, are subject to CPP contributions and EI premiums at source. Direct tips paid by the customer to you are not. Both kinds are taxable income on your return.
What is the difference between direct tips and controlled tips?
Direct tips go from the customer to the employee, and the employer does not control the amount or how it is shared. Controlled tips are tips the employer controls or possesses and then pays to the employee, such as a pool paid through payroll.
Can I pay CPP on tips my employer did not deduct it from?
Yes. An employee in pensionable employment can choose to make CPP contributions on direct tips by filling out Form CPT20. Without that choice, direct tips do not count toward CPP, though they are fully taxable.
How are tips taxed if I am self-employed?
Tips are part of your business income, reported along with your other sales and reduced by your business expenses.