By Arielle Alipio
Top Tax Deductions Freelancers (Almost Always) Miss
Bookkeeper Arielle Alipio shares her list of the top most overlooked small business deductions to help you prepare for tax season and beyond.
You know that shoebox of receipts you keep in your desk drawer? Well, it’s that time of the year again when you need to sort your life out and file your *dreaded* taxes.
It can be a stressful time for most small business owners and it’s easy to let business deductions slip through the cracks, so here’s a cheat sheet for small business deductions:
1. Vehicle Expenses
This doesn’t just include CRA’s mileage allowance but fuel, repairs and maintenance costs (oil change, anyone?) – those can all be included as vehicle expenses. Lease a car you use for work? That’s a tax-deductible business expense as well.
2. Training & Education Expenses
Did you buy a course on Udemy or Coursera to upgrade your skillset? Or maybe attend a masterclass to learn about something related to your business? Tax-Deductible!
3. Software Subscriptions
Do you use photoshop for your business? Or maybe something like Asana or Monday.com as a project management tool to keep your business on-track? Tax-Deductible!
4. Home-Office Costs
Most people deduct part of their rent or mortgage as home office costs, but did you know you can deduct part of your utilities like heating, home insurance, electricity and cleaning materials as well? Yes, you can!
To calculate the part you can deduct, use a reasonable basis, such as the area of the workspace divided by the total area of your home.
While allowed by the CRA, be careful with deducting property taxes and mortgage interest for home office expenses as this can affect your tax position when you sell your home. Talk to a tax professional before deciding to deduct these expenses on your business tax return.
5. Medical Expenses
Depending on your business’ structure and situation, you can get a Health Spending Account (HSA) for your business.
Health Spending Accounts perform a basic function: they convert the personal health and dental expenses of employees (including owners who are also employees) into a business write-off. This allows the business to transfer money tax-free from the business to the owners and employees to support their health and wellness.
6. Bad Debts
Have an invoice to a customer that you’re sure will never be paid? You can deduct the unpaid invoice as a bad debts expense.
7. Legal and Professional Fees
You can deduct and legal and accounting fees charged by professionals that are related to your business operations. The bookkeeper you hired to help with your bookkeeping? His or her fees are Tax-Deductible!
8. Startup Costs
Did you register your business or incorporate recently? Those costs are tax-deductible!
9. Membership Dues
Are you a member of a professional organization related to your business (hint: like Women Who Freelance)? Those dues are tax-deductible!
This list is not exhaustive. If you’re unsure whether or not an expense is tax-deductible, you can keep the receipt and come tax-time, ask your tax preparer or accountant to make sure you capture all business-related expenses.
I’m Arielle, the founder of a bookkeeping firm – Fix My Books and a member of the Canadian Institute of Bookkeeping. I was born and raised in Manila and immigrated to Canada from Hong Kong. I have a fur baby named Bane (a Bernese Mountain Dog) and I specialize in doing bookkeeping for professional services and e-commerce businesses.
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