Self Employment Income
- This information applies to individuals who operate as sole proprietors (not incorporated) and earn income from business or subcontract work.
- You may be both an employee and self-employed at the same time. All income sources must be reported on your personal tax return.
- Filing as a self-employed individual is more detailed than filing as an employee. Professional tax guidance can help ensure proper reporting and maximize allowable deductions.
- Canadian residents are taxed on worldwide income. If you earn income outside Canada, you may be required to pay tax in that country. In many cases, foreign taxes paid can be claimed as a credit on your Canadian return. Keep official documentation from the foreign tax authority.
Common Business Expenses
Depending on the nature of your work, you may be able to deduct reasonable business expenses, including:
- Advertising and promotion
- Vehicle expenses (fuel, insurance, maintenance, parking, repairs)
- Bad debts
- Business taxes, permits, and licenses
- Delivery, freight, and courier costs
- Insurance premiums
- Interest on business-related loans
- Meals and entertainment (generally 50% deductible)
- Office supplies and expenses
- Legal and accounting fees
- Rent for business premises
- Wages paid to employees (Note: Sole proprietors cannot pay themselves a salary. Profit is what remains after expenses.)
- Business travel
- Telephone and internet services
- Business-use-of-home expenses (portion of rent, utilities, insurance, mortgage interest, strata fees, and property taxes)
- Medical and dental insurance premiums
- Depreciation of major business assets
