Tax season got you stressed? Not sure what you can write off, or how? The myriad of different deductions for different types of individuals and families can be difficult territory to navigate.
It’s important you receive the deductions you deserve, while making sure you don’t make any mistakes and catch the attention of the CRA. Keep proper documentation and paperwork—receipts, logbooks, etc.—so you’re able to prove your claims should the CRA request proof.
Here are the main tax write-offs for…
If you’re self-employed, make sure the CRA sees you as self-employed and not as an employee who works from home. This can be proved in the form of a written contract.
As a self-employed individual, one of the biggest deductions you’re entitled to will be against your home office. If you do more than 50% of your work from home and use this workspace exclusively to earn employment income, you’re eligible to apply for home office deductions. This write-off includes a range of expenses such as a portion of home insurance, Internet services, property taxes and mortgage costs, utilities, repairs and maintenance. To determine what percentage you’re able to write off, you’ll need to estimate what percentage of your house your home office takes up.
If you use a car for your work, you are eligible to deduct expenses such as insurance, gas, registration fees, repairs and general maintenance. The amount you can deduct depends on your work-to-personal-use ratio. It is important to keep a detailed logbook of your driving habits to prove your claims.
You can also deduct any reasonable costs you incurred to earn money from your business. This can include office supplies, business-related meals and coffees, phone bills, or any memberships and subscriptions. But remember, keep those receipts!
…the incorporated professional
When it comes to tax savings, there are many advantages to being incorporated. Corporate tax rates are lower than personal tax rates, meaning that if you’re earning more than you need to live on, incorporation works to your advantage.
In general, any business expense is tax deductible. These can include a variety of items such as advertising, accounting, insurance, etc. as long as the primary use is for your business. This also means capital costs or fixed assets — buildings, vehicles, equipment, computers — are partially deductible, where you can write off a portion of these costs each year. See here for a detailed infographic and explanation of each expense.
Income split with your family members. If you hire a spouse or child, your corporation deducts their salary as an expense and the family member pays taxes on their own personal income tax rates, which would be substantially lower than your own. You can also add a family member as a shareholder and pay them dividends, which are taxed at a reduced rate.
As an incorporated professional, you can set up a Health and Welfare Trust, which means you can deduct personal medical expenses using pre-tax corporate earnings.
If you’re incorporated and work from a home office or use your vehicle for work, the same deductions apply as a self-employed individual.
…families with young children
If you have children under the age of 18, there are several tax benefits that can apply to your family. In my previous blog (link when posted), I detail each one (under the Families section), but the list includes the Family Tax Credit, the Enhanced Universal Child Care Benefit, childcare expenses, and tax refunds for children’s fitness or arts programs.
…the general public
The Tax Management Centre has provided a detailed list of the top 10 most missed tax deductions. These include charitable donations, medical expenses, moving expenses, dividend income, and disability expenses.
Don’t miss out on any of these key write-offs. If you have any questions or concerns about your taxes, feel free to shoot me an email or give me a call at 416-777-6368. We’ll make sure you’re receiving the deductions you’re entitled to!