When tax time rolls around, independent contractors in Canada can claim a number of deductions related to the cost of doing business.
People work as independent contractors in a wide variety of fields, such as writing and editing, truck driving and web design.
If you’re an independent contractor, you should be aware of the types of expenses that are tax deductible, so that you can save a bundle.
Materials and Supplies
Any money spent on your work as an independent contractor can be claimed as a tax deduction. If you purchase a computer, printer or other office machinery to be used in your business, you can deduct the cost from your taxes. All equipment used on the job is tax deductible. Smaller items, such as paper, ink cartridges, even pens, can be deducted. It's important to keep receipts in case you are audited. Receipts should be kept for at least seven years.
You can claim your office space as a tax deduction. If you rent an office, the money spent on rent can be deducted. Home offices can be claimed as tax deductions if you have a separate room used only for business. Under those circumstances, you can deduct a portion of your mortgage interest, utilities, repairs, insurance and depreciation. You can deduct phone and internet costs by having separate business accounts or by deducting the portion of your Internet and phone bill used for business.
Related Reading: Taxes for Independent Contract Work in Canada
If you need to travel to meet a client, deliver a product, perform a service or attend classes related to your business, you can deduct travel costs from your taxes. If you have a separate work vehicle, you can deduct all costs for the vehicle; if you use your personal car for work, you will need to keep track of the mileage used for business trips and deduct according to the current standard kilometre rates. Tolls and parking fees are deductible. You can also deduct the money spent on meals and hotels.
Business journals, books and online courses can be deducted from your taxes. You can also deduct the cost of continuing education required by law or any classes that improve the skills needed to do your work as an independent contractor. Any related expenses, such as notebooks or textbooks, can also be deducted.
Virtually every expense related to doing business is deductible. Association and union fees, provincial sales tax and GST can be claimed. Since CRA tax rules are complicated and subject to change, it’s always best to consult a tax professional so you don’t miss out on any potential deductions.
As you can see, there are many tax deductions for independent contractors that can result in significant savings.
If you are an incorporated independent contractor, discover how the Olympia Health Spending Account can provide significant tax savings by downloading our free guide: The Beginner's Guide to Health Spending Accounts to learn more.