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Freelancer Tax Tips for Canadians

Shawn Purdy On April 4, 2015

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Are you a freelancer? or have done freelance work before? Wither you sign your own contracts or you do contract work for other design or development companies, these tax tips will help you save money on your tax return. If you don't already know. As a freelancer you will not be paying taxes like most people. You will pay your taxes when you file you tax return. Because of this it can sometimes be a scary situation as you may end up having to pay thousands of dollars. Where most of your friends will be getting back money or paying very little. The advantage is you can write off a lot of things the average person cannot.

What can you write off?
The simple anwser is any business expense! If your buying stock photos for example. This is a business expense. Web Server, or hosting for your business. Domain names. Software purchases. Office Supplies. Advertising. If you work from home. You can write off your office as a % of expenses. For example if your home office is 25% of your living space. You can write off Rent,Electricity,Internet, Phone for 25% of your expenses on these items. From a legal point of view in order to write off a home office. You need to actually have a home office. For example a room that is completely dedicated to being an office. It cannot have a bed in it for example.

Business Gifts? Sure if you buy Hockey tickets for a client you can write those off. Just don't write off your mom's necklace you got for her for Christmas. That isn't allowed.

Car Expenses. While this will vary depending on where you are as is with most tax write-offs. If you Lease or buy a car for business purposes you can write off the car for those business purposes. This can get a bit tricky as you cannot write off any personal expenses related to the car. While the car may be more for business than personal use. You need to count out trips to visit family or friends, trips to the supermarket etc, But you can write off up to 0.50 cents a Kilometer! While you may be seeing dollar signs. Keep in mind that a cost of a car is much more than the gas you put into it. In fact most people are well over 0.50 cents a kilometer. So in realty it is not that great, but every little bit helps. I don't have the exact numbers per kilometer. It is best you check in your Province what the laws are for writing off car expenses as it can vary greatly. But it does mean if you need to make an important business trip. You can write off the entire trip!

Keep records of everything!
While you may not be completely sure if you can write it off. Keep it anyway. Keep a log of all your expenses as well throughout the year. That way at the end of the year it will be much easier to calculate your expenses. It is pretty easy to setup an excel sheet to do all the math for you in real-time.

Income Brackets.
Depending on what income bracket you fall under. You could end up paying a ton in taxes. If you think you might fall into a bigger bracket. It would be wise to spend some money on your business before the end of the year. That way you can write it off as an expense, and gain value in your business. You may choose to spend it on advertising, or equipment, software. Whatever you choose, make sure it is actually useful to you. You may need to spend a couple thousand dollars in order to push yourself to a lower income bracket, but that could save you a few thousand in taxes. In some cases it can make the difference of you paying something or not.

As a young kid I always used to laugh at business people writing off everything. But truth is it saves you a ton of money. Banking fees? Sure! they are a part of running your business. Paypal Fees? Hell yeah!

Do you have suggestions for Canadians to save money on taxes? Post them below!


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