Tax Deductions You Can Claim If You’re Self Employed

Tax Deductions You Can Claim If You’re Self Employed

Hey everyone its Janine here and today
i’m here to talk to you about what you can claim if you are self-employed for
tax purposes. A lot of people have a side hussle or part-time business income or
are completely self-employed and are confused as to what they’re able to
claim on their tax return when it comes time to file. I’m here to help you make
sure you get the maximum amount of deductions that you can take while still
staying on the right side of the law. First you’re going to want to make sure
that you’re filling out the self-employed schedule and this is found
in your tax return on Schedule 2125 in this schedule you’ll be able to fill out
all of the income that you earned during the year and this is incredibly
important you need to make sure that you’re claiming all of it
and you need to make sure that you have record of all of the revenue that has
come into your business. So sending invoices is a good habit to get into. As
you scroll down you’ll see that you hit the expenses section and this is the
area that you want to include all of the expenses that you incurred as a business
owner in order to make income. It’s important to note these expenses do have
to be incurred to make business income and you can’t just include personal
expenses in here. So if you are spending advertising dollars or dollars on
employees or supplies these would all go in this category and there’s a complete
list on this form that CRA has provided and I’ll provide the link below in the
comment section. Meals and entertainment is always a section that we get a lot of questions on so I wanted to take a minute to address that.
Meals and entertainment can be included on your tax return but only fifty
percent is deductible. In addition to this these expenses do have to be
incurred for business purposes so if you’re going for lunch with a girlfriend
and you have a self-employed business unfortunately this is something that
you’re not going to be able to in on your tax return. CRA is always looking
at a reasonableness test and so if it wasn’t incurred to earn any business
income if you’re going out for lunch with your mom or a friend and grab me a
glass of wine that probably isn’t an appropriate business expense. That being said if you’re actually on a lunch with someone that you do business with, fifty
percent of it will be deductible. Home Office is an area that we get a lot of
questions about and the home office is partially deductible if you spend more
than 50% of your time in your home office to earn business income. If you
meet this test then you’ll need to calculate what portion of your home you
use to earn that business income in your office. Sso the best way to do this is to
actually measure the square footage of your house and then calculating square
footage as a percentage of the room or space that you use again CRA is going
to look at a reasonableness test and so if you’re including 90 percent of your
home that probably isn’t appropriate and this applies to things like cell phones
as well. No one ever uses a hundred percent of their cell phone for business
and so if they’re paying for your cell phone out of pocket you’re going to want
to prorate that as a portion of business and personal expenses. The last area that
we get a lot of questions about is the vehicle expense and this is again going
to be a portion for business and a portion for personal. There is a
schedule on your tax return that will allow you to calculate this amount and
it’s really important that you’re writing down your kilometer logs that
you use your vehicle for earning business income versus the kilometers
that are driven for personnel. Another way to do this as opposed to a pen and
paper is through an app and I’ll link a couple options in the comment section
below. At the end of the day CRA again
coming back to that reasonableness test and wants to make sure that taxpayers
aren’t taking too many deductions. If you have the receipts to back up your claims
and the amounts that you’re claiming seem reasonable such as maybe 50% of your
phone or 20% of your home as home office then likely things are going to be a-ok
if CRA ever looks into you. It’s really when you push the boundaries and
try to claim as much as you possibly can that you can get in trouble and we
really do want to avoid that because it can be an incredible headache for the
taxpayer having to prove out every line of their tax return. If you enjoyed this
video please give it a thumbs up and subscribe to my channel and if you have
any questions about what you can claim as a self-employed person please leave
them in the comment section below! I’ll see you next week!

9 thoughts on “Tax Deductions You Can Claim If You’re Self Employed”

  1. Please try out our revolutionary free tax app for self-employed Canadians.

    It will help any self-employed individual in all Canadian provinces.

    1. Helps you determine exactly how much GST/HST/QST you owe
    2. Calculates depreciation on vehicles, computers, tools
    3. Calculates HOME Office Expenses
    4. Tracks Sales and GST/HST/QST  collected. Also accommodates PST and RST.
    5. Prorates mileage and applies % to vehicle expenses
    6. Tracks business expenses.
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  2. First of, great video, Thank you. Question, as self employed for the first time, is it necessary to have a business license or can I do without it? Thank you.

  3. Great advice! I started a small online sales store in the marketplace of FB. Items are generally gently used to new. The amount was minimum but often aided as a supplemental income during a very stressful family period. Unemployment wasn’t a viable option at the time. Should this income be filled on this year’s taxes?

  4. I am a self employed student trying to get my RN, I could include my books, tuition fee, uniforms, etc. as well, and the continuing education that you incurred throughout the process of getting your license up to date.

  5. Hello! I see you are responding to commenters so I figure I'd give it a go! I own my own brick and mortar bicycle shop, since Nov. 1st, 2017. I sell new and used bicycles, as well I collect and restore vintage bicycles…. as an investment(because they gain value over time) and because it gives my business popularity in a niche market. When I purchase vintage bicycles and parts I do it online via my cell phone anywhere and everywhere via my cell phone and use Paypal's services for the transactions. I lump these into my Used Bikes category which is an inventory item which also is in the cost of goods category. That is a deduction category, I write off my cell phone 100% as well. Cell phone reasons being I use it for all outgoing calls to customers in store(landline issues) and because of the constant buying and selling online, and social media marketing I do. Some of those deducted bicycles I do not plan on selling anytime soon or ever because they have become fixtures of the store and they attract visitors in that niche market. Should they not be lumped into that cost of goods category? And come inventory time, accounting for my remaining Used Bike values can be more difficult because they are lumped together with the regular used bicycles offered for sale in store. Any advice is welcomed! Thank you

  6. I have been looking around for this kind of information. Will you video some more in future? I’ll be grateful if you will. thanx for Lucas

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