Key takeaways
- →Whether the commission is paid via T4 (employment commissions) or T4A (self-employed commissions), a straight-commission earner is qualified using two years of income and the Notice of Assessment, not a single recent month.
- →The standard method is a two-year average of line 10120 or T4A commission income — a strong current month doesn't override a weaker historical average.
- →A rising trend can sometimes support using the higher, more recent year; a declining trend almost always pulls the qualifying number down, not up.
- →Business expenses claimed against commission income on the T1 reduce the net income lenders will actually qualify, even though the gross commission looked larger.
Commission income confuses a lot of first-pass income calculations because the T4 vs. T4A question feels like it should matter more than it does. Either way, once the pay is 100% commission-based with no guaranteed base, the lender's real question is the same one it asks a self-employed applicant: how much of this is a reliable, repeatable pattern, not how the slip happened to be issued.
Here's how that pattern gets measured, what a rising or falling trend does to the number, and why the Notice of Assessment ends up mattering more than any single pay statement.
01 · Is a commission earner treated as employed or self-employed?
It depends on the slip, but the practical underwriting treatment converges either way. An employee paid entirely on commission through a T4 reports employment commissions on line 10120 of their T1, alongside line 10100 — this is still employment income, verified with a letter of employment and T4s, even though there's no guaranteed base.
A commission earner paid via T4A — box 020, self-employed commissions — is qualified as self-employment income, flowing through the self-employment lines on the T1 and supported by two years of Notices of Assessment. Real estate agents and many insurance brokers commonly fall into this second category, since they're typically independent contractors rather than employees of their brokerage.
02 · How do lenders average two years of commission income?
The standard method takes the commission income reported for the last two tax years — from T4 line 10120 or the T4A-driven self-employment lines — and averages them, cross-checked against the Notice of Assessment for each year to confirm the figures actually match what was filed with the CRA.
This is deliberately conservative: a single very strong recent year, without a matching second year, isn't enough on its own. Two consistent years of Notices of Assessment is the evidence a lender is actually looking for.
03 · What if commission income is rising or declining year over year?
A clearly rising trend — documented growth, a reasonable explanation (a larger book of clients, a territory change, more experience) — occasionally lets a lender use the more recent, higher year rather than the average, but this is a judgment call some lenders make and others don't. It's never guaranteed, and it's stronger with a third year of history showing the trend rather than just two data points.
A declining trend works the other way more consistently: most lenders will average the two years down, or use the lower recent figure outright, on the reasoning that the most recent year is more predictive of what continues. There's little upside in over-arguing a declining trend — a clear, honest explanation for the dip matters more than trying to talk the underwriter into the higher historical figure.
04 · Do business expenses deducted against commission income reduce qualifying income?
Yes, for the self-employed (T4A) side of this in particular. The commission income that matters for qualifying is net income after business expenses — the figure that actually flows to the T1 and the Notice of Assessment — not the gross commission before expenses like vehicle costs, licensing fees, marketing, or office space that a commission-based independent contractor typically deducts.
This is a common source of frustration: a borrower who feels like they “made” a much larger gross figure sees a lower qualifying number once legitimate business deductions are applied. It's not a lender being conservative for its own sake — it's the same net-income principle applied to every self-employed file, covered in more depth in our Self-Employed Income Calculation Worksheet.
Commission math, documented properly
Two years of NOAs, one defensible number.
Treadstone's fulfillment team builds the documented commission-income calculation — gross, net, and trend — before submission, so it reads as answered rather than open-ended.
05 · What documents does a commission earner need?
- 01Two years of T4s or T4As showing the commission income, matching the corresponding tax years.
- 02Two years of Notices of Assessment, confirming the figures as filed and flagging any CRA reassessment or amount owing.
- 03A letter from the brokerage or employer confirming the commission structure, tenure, and, where relevant, the split or referral arrangement behind the payments.
- 04A T2125 (Statement of Business or Professional Activities) for T4A-based commission earners, showing the expense deductions behind the net income figure.
Frequently asked questions
This article is general information to help you scale — not a substitute for tailored advice on your specific business, licensing, or compliance obligations. All figures are illustrative examples for planning purposes; actual costs vary by province, market, and brokerage.