Tax deduction! This is something all of us want to know. What I can deduct so to lower my taxes.
Here are a few things you can deduct as a self-employed:
1) Gifts, no more 5% from annual sales.
2) Home office expenses: interest for the mortgage, utility bills…you should keep the same percentage when you claim all of them. So if your space for business from the total surface of the house is 20%, than you can claim from your utility bills 20% for business purpose. About how much to deduct is recommended to discuss with your accountant.
3) Cell phone expenses: if you have a home phone you can claim up to 100% of the cost of your cell phone bill because it can be considered as a need for the business; if you do not have a home phone you have to decide with your accountant about a percentage for deduction because in that case you can’t claim the whole cost of your cell phone bill.
4) Gas expenses: in order to justify them to CRA is good to have a driver’s log, i.e. a notebook where you will write down the no. of km. you have travelled each time using your personal car. Be aware:
a. The distance from work to home and home to work should not be counted as expense for business purpose
b. If you do not have a driver’s log you have to use an estimate, based on your daily activity, meaning the number of km travelled for business purposes out of the total number of km travelled in the year
5) And more, from case to case… For this you should contact your accountant to advise you about other applicable deductions.
Nicole Dronca, Accountant and Tax Preparer