**This is a sponsored post written by me on behalf of Turbotax. All opinions are my own.
Side hustles have become a big thing over the last few years. If you’re unfamiliar with the term, it’s when you do some extra work on top of your day job that brings in a little bit of extra money. You’re essentially freelancing, but side hustling sounds so much more fun.
Most people who start a side don’t tend to think much about the tax implications, but once the cash starts coming in, the Canadian Revenue Agency (CRA) are going to want their cut. Don’t worry, everyone has to pay their fair share of taxes — otherwise, it’s called tax evasion — but here are 5 ways to save on your taxes when you have a side hustle.
Claim your home office expenses
It doesn’t matter if you have a formal office in your home or if you’re working from your kitchen table, you can deduct a reasonable amount when you’re ready to file your taxes. Technically speaking, you claim the square footage of your workspace, but the CRA isn’t going to ask you to bust out the measuring tape so just estimate a %. Let’s say your office space is 10% of your home and you pay $1,000 a month in rent or towards your mortgage, that means you could claim $1,200 ($100 X12) per year as a business-use-of-home expenses. The same rules apply to your internet and cell phone bill so don’t forget to deduct those expenses too
Save those receipts from your meals and travel expenses
If you’re meeting clients over drinks or a meal for the purpose of earning income, then you can claim 50% of the bill which includes the tip and taxes. However, if you have a GST/HST number, you’ll want to claim the tax from your bill as an input tax credit. Of course, you need to keep your receipts for your records in case you ever get audited.
As far as travel is concerned, it’s similar to the home office expenses I mentioned earlier. If you drove 10,000 kilometres this past year, but 3,000 kilometres were for your side hustle; you can then claim 30% of your auto expenses on your tax return. Yes, you can also claim public transportation costs as long as you were taking the bus/train for the purpose of earning income.
Use TurboTax Live Assist & Review Self-Employed
If these deductions are making your head spin, don’t worry, there’s a simple solution to make your life easier. TurboTax solutions for Self-Employed walks you through the tax filing process while prompting you with self-employment questions. This ensures you get every business deduction you’re entitled to which in turn means more money in your pocket.
Now, if you need a little bit of hand-holding, TurboTax Live Assist & Review Self-Employed will appeal to you since the SmartLook option allows you to connect to a live tax expert where you can ask them questions or have them do a full review of your completed return.
Alternatively, TurboTax Live Full Service Self-Employed allows you to have your taxes fully prepared by one of TurboTax’s Experts who have an average of 17 years’ experience preparing taxes. Going this route saves you time and gets you year-round audit support so you’ll always have someone in your corner when it comes to taxes. Read my TurboTax Self-Employed review if you want to learn more about the ask an expert feature.
Make an RRSP contribution
Whenever you contribute any amount to your Registered Retirement Savings Plan (RRSP), you can deduct that amount from your income which lowers the amount of tax you owe. In other words, the more you contribute your RRSP, the less you pay in taxes. That being said, you can’t simply contribute an unlimited amount, your limit for each year is 18% of your earned income for the previous year, but that limit carriers forward. Keep in mind that if you’re currently not earning much income, it’s likely not worth making any RRSP contributions just to reduce your taxes.
Doing your taxes can be a bit intimidating, but it doesn’t have to be. By using TurboTax solutions for Self-Employed you’ll never miss a deduction again which will help you get the highest tax return possible.