Tax Advice for the Self-Employed in Canada
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Being self-employed in Canada means that you will pay a different tax rate everyone else. Knowing what you owe is key to staying up-to-date on your taxes.

When you are self-employed, you will have to pay a different tax rate than the rest of the population who are working for other companies or are not “self-employed.” Knowing what owe in taxes is key to ensuring that you are paying the taxes you owe on time each year. Staying in good standing with the Canada Revenue Agency (CRA) will help you avoid tax issues in the future as well as penalties and other fines that you may otherwise find yourself having to pay.

How are the Self-Employed Taxed in Canada?

The tax brackets for the self-employed in Canada are as follows:

  • The first $45,282 of your income gets taxed at 15%
  • The next $45,281 gets taxed at 20.5%
  • The next $49,825 will get taxed at 26%
  • The next $59,612 gets taxed at 29%
  • Anything over $200,000 gets taxed at 33%

All Provinces except Quebec tax the self-employed in the same way.

Good things to know

There are some other items of note for individuals who are self-employed throughout Canada. Some of these notes include the following things that you should keep in mind when you are self-employed and filing your taxes in Canada:

  • A “business” is a pretty broad topic in Canada when it comes to what constitutes a business. A business is specifically identified as any profession, calling, trade, or undertaking of any sort that gets done with a reasonable expectation of returning a profit for one’s work.
  • A lot of various tax breaks get offered to businesses in Canada. Using a tax preparation service can help you determine if the items you wish to deduct from your taxes are reasonable and acceptable according to the CRA.
  • If you are filing as a partnership, you should also use a tax preparation service to help prepare your taxes so that you take the guesswork out of what is otherwise a more complex way to file your taxes. Having someone help with your taxes ensures that you are paying what you owe and are in good standing with the CRA. It also helps ensure that you’re not paying more than you owe if you’re not claiming proper business tax expenses.

Remembering these key points about taxes for the self-employed throughout Canada can help make sure that you pay what you owe the CRA each year, but that you are not getting charged more than you owe or withholding money that you do owe.

Lesser-Known Tax Breaks

The self-employed are given all kinds of tax-breaks throughout Canada, which can save you a considerable amount of money when you are going to file your taxes. The following are a brief review of what expenses you can deduct from your taxes, even if you may not be aware of them:

Business-Related Expenses

Any expense related to running your business may get deducted from your taxable income including everything from startup costs to delivery or shipping costs for supplies or items you need to run your business are all deductible.

Office Space/Home Office Space Costs

Any sorts of expenses you have to rent office space can get written off of your taxes. For a home office, if your office is “X” percent of the space in your home, you can divide that by the total size of your home and write that much of your home off of your business expense. For example, if you have a 2000 square meter home and a 200 square meter office, you can write 10% of your home costs off of your taxable income.

Entertainment/Dining Costs

Anytime that you are taking either entertainment or meal-related expenses off of your taxes, you are allowed to deduct up to 50% of those costs if your entertainment/dining costs were business-related.

Vehicle-Related Expenses

If you have any vehicles that are dedicated solely to your business you may write the cost of all of the vehicle’s insurance, maintenance, repairs, gas/fuel, etc. off of your taxes.

Remember The Small Stuff

Even small stuff that might not seem like a big deal can add up when taking expenses off of your taxes. Items like parking fees or postage stamps may seem small, but they add up in the end and can save you a lot of money off of your taxes each year.

These are some of the lesser known business expenses that can get written off of your taxes and can help save you quite a bit of money in the process.

If you are a business owner and are not completely sure about how to go to about filing your taxes, seeking out help can be the best way to go. Filing as a business is more expensive than filing for your personal expenses. As a sole proprietor, you can expect to pay between $200-$500 depending on the complexity of your business. If you’re incorporated, you expect to pay between $800-$1800.

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