8 freelance tax deductions you might not have considered
Navigating the tax landscape as a freelancer or a self-employed person is tricky, and can easily leave you feeling you earned less than you thought you did.
The good news: knowing how to maximize your deductions by deducting business-related costs from your taxable income can save you a significant chunk of your hard-earned dough. Y’know, so you can keep more of it in your pocket come tax time.
Whether you’re fully self-employed or you freelance on the side to supplement your income, you may be able to claim the following self-employed tax deductions to maximize your return.
Remember: always keep your invoices and receipts in good order, as the Canada Revenue Agency may request these for up to 6 years!
1. Business-use-of-home-office
You can write off a percentage of your rent if you work from home. The square footage of your apartment or house must be divided by the square footage of your home office to arrive at the right amount. For example, if your workspace occupies 20% of the space in your apartment, you can write off 20% of your rent as a tax deduction. Business-use-of-home expenses may also include mortgage interests, property taxes, utilities, insurance and maintenance.
2. Phone and communications
If you have a phone you use for both business and personal use, you can calculate your deduction in the same manner as you’d calculate your home office use. On the other hand, if you have a separate phone used only for business purposes, go ahead and write off the entire cost as a business expense.
3. Advertising, marketing and internet-related expenses
The cost of running ads—be it on social media, on websites, or on the radio—can all be claimed as expenses. So can domain fees, and website design and maintenance costs, as long as it’s all essential to running your business.
4. Travel expenses
Travel expenses associated with client meet-ups, conferences and seminars, business errands, and customer visits can be deducted from your tax return. These might include bus, train and taxi fares, airplane tickets, accommodations, and food. Keep a detailed log of your trips, including dates, purposes, and expenses.
5. Vehicle expenses
Along the same vein, you can deduct expenses for a business-related vehicle. These might include insurance, gas, rental fees, repairs, maintenance, and breakdown coverage. Always keep a record of both your business and personal mileage.
6. Professional fees and memberships
You can write off professional development and educational expenses that help you stay current in your field, such as memberships to professional organizations, or skills training programs. Fees for professional services count too—think accounting, or legal advice.
7. Meals & entertainment
If your self-employed business requires you to pay for meals and entertainment with clients or business partners, you can claim these costs. Generally, you can only deduct 50% of the cost of meals and entertainment. For example, if you spend $200 on a client dinner, you can claim $100 as a business expense.
8. Bank charges, including interest
Interest and bank charges related to your business can be deducted, as can interest on business-related loans. There are, however, restrictions on the amount of interest you can write off when borrowing to purchase a car, buy undeveloped land, or pay a mortgage on any real-estate.
9. Depreciation
Depreciation on assets you use to earn self-employment income (i.e., computers and office furniture) can also be deducted. Learn more about how to calculate depreciation here.
As a freelancer or self-employed person, knowing what expenses you’re eligible to claim is half the battle. Beyond that, the best you can do is simplify your tax filing process as much as possible by staying hyper-organized, keeping proofs of purchase, and hiring out the pro services of a cloud-based Chartered Accountant practice—incidentally, also a deductible expense!
