Cornerstone Advisory & Tax

Self-employed

Are you Self-Employed?

You are likely considered self-employed in Canada if you are a:

  • Freelancer or Independent Contractor
  • Gig Worker
  • Side Hustler (e.g., selling products online, offering a local service)

If this applies to you, you must report your business income and expenses on your personal tax return using the Statement of Business or Professional Activities. (T2125 for federal and TP-80 for Quebec).

How to Reduce Your Tax Bill

You can deduct reasonable expenses incurred to earn your business income. The key rule is that the expense must be directly related to your work. Personal expenses are not deductible. This is not a complete list. For a comprehensive review of all your eligible deductions, please consult with your tax professional or contact us.

Home Office Expenses

If you work from home, you can claim a portion of your household costs. The amount is based on the space (e.g., a dedicated office room) and time used for business.

Vehicle Expenses

If you use a vehicle for work, you can claim a portion of operating costs. You must track your kilometers driven for business vs. personal use.

Operating Expenses

Supplies: Cost of items your business uses (e.g., cleaning supplies for a plumber, pens and paper for an office).

Travel: Costs for flights, hotels, and ground transportation for business trips.

Advertising: Costs to promote your business.

Capital Cost Allowance (CCA)

You cannot immediately deduct the full cost of long-term property like furniture, computers, or vehicles. Instead, you deduct their cost over several years as they depreciate, through Capital Cost Allowance (CCA).

The Accelerated Investment Incentive (AccII)

To encourage investment, the government offers an accelerated write-off for eligible property acquired after November 20, 2018, and available for use before 2028.

Other Common Expenses

Meals & Entertainment: 50% of the cost of meals and entertainment for business purposes.

Bad Debts: Money owed to you that you are unable to collect.

Unlock Every Tax Deduction You Deserve

The intricate rules for deductions and CCA can be challenging, but you don’t have to figure them out alone.

At Cornerstone Advisory & Tax, we specialize in:

  • Supporting small businesses with proactive advice.
  • Strategic planning to maximize growth and savings.
  • Simplify your finances and gain peace of mind.

FAQs

Do I need to register for and charge GST/HST?

It depends on your annual revenue and what you sell. You are generally considered a “small supplier” and are not required to register if your business earns $30,000 or less in worldwide revenue over the last four consecutive calendar quarters.

However, there are two key exceptions:

You must register if you provide digital products or services to Canadian customers (e.g., online courses, software, streaming), regardless of your revenue.

You can choose to register voluntarily at any time, which may be beneficial to claim back the GST/HST you pay on business expenses..

When am I required to start charging GST/HST?

You must begin charging GST/HST and register with the CRA once you cease to be a small supplier. This happens in any of the following scenarios:

Scenario 1: Voluntary Registration
You can choose to register immediately, even as a new business. This is often a smart move if you expect to exceed the $30,000 threshold soon or have significant startup costs, as it allows you to claim Input Tax Credits (ITCs) to get the GST/HST you paid back.

Scenario 2: The $30,000-in-One-Quarter Rule
If your revenue from a single calendar quarter exceeds $30,000, you are no longer a small supplier immediately. You must charge GST/HST on the sale that pushed you over the limit and on all subsequent sales. You have 29 days from that date to register.

Scenario 3: The $30,000-over-Four-Quarters Rule
If your total revenue over the last four consecutive calendar quarters exceeds $30,000, you are no longer a small supplier at the end of that period. You must start charging GST/HST on the first sale of the second month after the quarter in which you exceeded the limit. You have 29 days from the first day of that second month to register.

What are the benefits of registering for GST/HST, even if I’m a small supplier?

The primary benefit is the ability to claim Input Tax Credits (ITCs). This allows you to recover the GST/HST you pay on your business-related purchases and expenses, such as:

Office supplies and equipment

Business-related travel and meals

Professional services

Home office expenses

This can lower your overall business costs, making voluntary registration a valuable tax planning tool.

If I’m ready to register for GST/HST . What should I do next?

You can register online through the Canada Revenue Agency (CRA) website. Once registered, remember to:

Start charging the appropriate GST/HST rate to your customers.

Keep all receipts for your business expenses to support your ITC claims.

File your GST/HST returns regularly (annually, quarterly, or monthly).

What is Capital Cost Allowance (CCA)?

CCA is the tax term for depreciation. It’s the annual deduction a business can claim for the wear and tear on its capital assets (like machinery, vehicles, or buildings) based on rates set by the tax act.

What kind of records do I need to keep and how long must I keep my business record?

The CRA requires you to keep your business records and supporting documents for six years from the end of the last tax year they relate to. And You should keep all documents that support your income and expenses, including:

Sales invoices

Receipts for purchases

Bank and credit card statements

Contract agreements

Vehicle mileage logs (if applicable)