Being self-employed can be scary at times. Will I get that contract? Will I generate enough income? How can I take a vacation if I don't get vacation pay?
Being self-employed also has a number of benefits—flexible hours, the ability to work in yoga pants (if you're working at home—I suggest you put on real clothes if you are going to work at a client's office), and the ability to deduct more expenses from your income. CRA knows how being self-employed is beneficial to the taxpayer (and detrimental to their tax revenue), so they have some pretty strong guidelines about who is considered a contractor, and who is considered an employee. That being said, if you fit the criteria for being self-employed, there are more deductions available to you than are available to someone who is an employee.
1. Business use of home.
Do you have an office space in your home? Take that square footage divided by the total square footage of your home, and you can apply that percentage against your home costs (property taxes, insurance, mortgage interest, repairs, etc.) and deduct that total from your income. (Scroll to the bottom of this form.)
2. Auto expenses.
If you're driving to and from client offices (or to events, etc. if you're a full-time blogger), you get to deduct a percentage of your annual auto expenses (insurance, gas, repairs, etc.). CRA is sticky about correct mileage used for calculating the percentage, but it's not too hard to track. Write down the kilometres or miles on your odometer on January 1st and on December 31st. Each time you drive for work, write down the distance you drove. The total you drove for work divided by the total you drove all year is the percentage you get to use.
3. Travel expenses.
Are you a freelance writer/blogger? Do you travel to conferences? Your flight/hotel/meals are fully deductible. Keep your receipts and deduct them from the income you receive.
4. Internet and telephone expenses.
While a home line is not deductible, the percentage of your cell phone and Internet costs that are related to your work are fully deductible.
Capital Cost Allowance (CCA)—also knows as depreciation—on items, such as computers, plus software, office expenses, and all other expenses listed on the T2125.
Do you have any questions about the above? Or if any other expenses are deductible? I'm here to help you claim all that you can.