Income Tax Guide To: Self-Employed or Small Businesses

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In Canada, there are a variety of tax credits available to the self-employed and proprietors of small businesses. In fact, the Canadian Revenue Agency (CRA) deems any self-employed person as the proprietor of a business. As long as you have not incorporated your business (thereby creating a corporation), you may be eligible for the following tax claims. Read on for Liu & Associates’ guide to getting the most out of your self-employed or small business tax return.

EXPENSES

“You need to spend money to make money–“ if it’s been said once, it’s been said a million times… And it’s absolutely true! As any self-employed person or operator of a small business knows, everything from buying equipment to building a client base can make a significant impact on your funds. Luckily, CRA offers tax credits for such expenses. Generally, a non-depreciating expense (ie: stationery, inventory, etc.) is eligible for its full credit for the tax year in which you purchase it. Depreciating expenses (ie: vehicles, furniture, etc.) must have their credit spread over the lifetime of the asset; this involves multiple tax years and is covered under Capital Cost Allowance (CCA).

CAPITAL COST ALLOWANCE (CCA)

If you run a small business or maintain self-employment, major purchases are a fact of life. CRA allows credits for these expenses, but significant items such as real estate, furniture, equipment and vehicles often outlive the tax year in which they were purchased. To account for this, major purchases qualify for Capital Cost Allowance (CCA): a yearly amount– adjusted for depreciation– that can be credited against your tax commitments.

HOME OFFICE

A huge number of successful businesses originally grew out of the homes or living spaces of their founder(s). Modern self-employers or small business operators can claim several different credits. These are available to those that use part of their home as a dedicated workspace or those that consistently work in their living space. Rent/mortgage payments, maintenance costs, utilities, property tax and home insurance are just some of the expenses you can claim if you make use of a home office.

OTHER TIPS

  • All proprietors should familiarize themselves with the GST/HST requirements for Self-Employed or Small Business
  • Sole proprietors only need their SIN to file business earnings as part of their tax return; partnerships and corporations require a Business Number from CRA, as well as a CRA Business Account

Still have questions? Contact or visit Liu & Associates today. Our experts will guide you to the best possible tax return for your self-employment or small business.