Self-employed? How to save the most on your tax returns

Many expenses can be claimed on a tax return if you’re self-employed. How can you save the most money? By knowing what deductions you're eligible to receive.
If you work for yourself and report a business income, you have the good luck of being able to deduct several expenses on your tax return for the self-employed. The Canada Revenue Agency’s (CRA) online list of acceptable deductions specifies that only expenses used to generate business income can be considered. So, if you want to avoid all kinds of unpleasant consequences—audits and penalties included—be sure to stick to actual expenses that meet this criteria. In other words, don’t get greedy.

Self-employed? How to save the most on your tax returns

Which expenses are eligible?

First, you have to be able to justify that your expenses were incurred as part of your activities to generate income. Keep invoices, contracts, receipts and any cheques for goods and services that served that end. In short, keep anything that backs up even the smallest expenditures. Keep in mind that credit card statements can’t be used as proof if the CRA asks you to explain an expense on your self-employed person’s tax return.

Here are some of the expenses you could possibly claim, if they helped you earn revenue:

  • Business start-up costs
  • Interest on borrowed money
  • Vehicle expenses, parking and travel
  • Insurance costs
  • Advertising expenses (newspapers, radio, television, online, etc.)
  • Meals and entertainment at a conference, for example
  • Office supplies, furniture and equipment
  • Wages
  • Business taxes
  • Membership in a professional association
  • Accounting expenses and legal fees
  • Phone, Internet and courrier services

Work from home?

If you conduct business from your home, whether you’re a homeowner or a tenant, you can claim deductions for your:

  • Heating and electricity costs
  • Household cleaning products
  • Home insurance
  • Property taxes
  • Mortgage interest

Of course, you can’t deduct the entire amount that you pay for these expenses but rather a reasonable portion thereof. The amount is calculated as the percentage of space that your home office occupies in relation to the area of the house.

Remember

Under income tax law, you have until June 15 to file your tax return for the self-employed. The same goes for your spouse. However, if you owe money to the government, remember that the interest is calculated on the outstanding balance from May 1.

  • If you don’t want to make any mistakes on your federal and provincial tax returns, it may be best to do business with a tax expert. Above all, don’t try to fudge any expenses to inflate your deductions. Tax fraud is expensive.
The material on this website is provided for entertainment, informational and educational purposes only and should never act as a substitute to the advice of an applicable professional. Use of this website is subject to our terms of use and privacy policy.
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