If you’re self-employed, there are a number of expenses you are eligible to deduct on your tax returns. Knowing what to deduct can make a significant difference in your tax liability but, like many self-employed Canadians, you may find it difficult to keep track of everything you can claim.
In this article, we cover five of the most common expenses self-employed individuals can deduct when they file their taxes.
Home workspace expenses
If you use your home as a workspace, you can claim a portion of your home expenses as a deduction on your taxes.
You can take advantage of these deductions if your home is your primary place of business (you work exclusively from your home) or if you use space in your home solely to earn business income and regularly meet clients, customers or patients there. Eligible expenses include expenses such as rent, mortgage payments, utilities and property taxes.
Deducting home workspace expenses can be a bit tricky since you can only claim expenses for the percentage of your home you use for work. You’ll need to do a number of calculations to determine the amount you can deduct.
First, take the number of hours in the day you use space in your home for your business, and then divide it by 24 hours. Multiply the result by the percentage of the area of your home used for business, and then multiply that by your total annual home expenses.
How to calculate your home workspace expenses
If you use your vehicle for business purposes, you can write off a portion of your expenses such as fuel, maintenance, and insurance, and you may also be able to claim capital cost allowance on the capital cost of the vehicle itself. You can either claim a portion of your actual expenses or use the simplified method which is based on the number of kilometres driven for business purposes.
Keep in mind that if you use your vehicle for both business and personal purposes, you will need to keep detailed records of how many kilometres you drive for business in order to claim expenses related to those trips.
Business travel expenses
If you travel for business purposes, you can claim expenses such as airfare, hotel accommodations, and meals. It is important to keep detailed records of your travel expenses and to ensure that they are directly related to your business activities.
Office supplies and equipment
You can write off the cost of office supplies such as paper, ink cartridges, and postage. You can also claim the capital cost allowance on the cost of office equipment such as computers, printers, and phones. Keep in mind that if you use these items for personal use as well, you can only claim the portion that is used for business purposes.
If you hire a professional such as an accountant, consultant or lawyer to help you with your business, you can claim their fees as a deduction on your taxes.
Never miss out on a deduction again
If you’re having trouble keeping up with your taxes, it may be time to consult an accountant. RHN has a team of tax specialists with extensive expertise in self-employed tax claims and deductions. Contact us for support any time.
This post has been prepared for general information purposes. It is not advice. The information presented may not fit your unique situation, please consult one of our trusted business advisors at RHN CPA for further clarification and interpretation of your circumstances.