As a self-employed individual, taxes are one of the biggest parts of running your business successfully, legally, and smoothly. You can’t avoid them and even if you try, they will eventually catch up to you, so it’s important to learn how to do them right the first time. Self-employed individuals do not have their taxes deducted from their paycheques automatically the way employees with a salary and a T1 do. So it is especially important to track purchases, investments into the business, and how much they owe to the country – a professional accountant can make the mystery and headache of self-employment taxes much easier.
Business Expenses as a Self-Employed Individual
Expenses like food and entertainment can only be claimed up to 50% of the amount spent. Most expenses that pile up can be deducted but within reason. If you have any expenses that are a combination of business and personal, only the business expenses can be claimed on your tax returns.
Capital Property as a Self-Employed Individual
Capital property costs are essentially the main things your business needs to function like office furniture, computer equipment and other digital equipment, or a studio/office space for the use of the business. Since these are considered larger expenses, they can be submitted in the form of depreciation.
Home Office Expenses as a Self-Employed Individual
If you do most of your business at home and it acts as a place of business, you can deduct its expenses. This is only possible if it is the only place where you work and earn your income, and if your home is used in place of an office to have client meetings or to accept customers regularly.
Some of the home office expenses you can deduct on your taxes are:
- Rent or mortgage interest
- Home insurance
- Internet & phone bills
- Property taxes
- Capital Cost Allowance (CCA)
- Home maintenance
- Vehicle Use
Tax Owing Over $3,000
For tax owing over $3,000, you will have to pay your taxes back in instalments, which the CRA will remind you of. This is the case if it’s more than $3,000 in the previous 2 years or the current year.
Self-employment taxes can be confusing and frustrating, however, with a professional accountant from AccNet in Vancouver, your taxes as a self-employed individual will be a breeze. Get in touch with us to get started.