The good news is that Canada’s tax system isn’t that complicated, and the CRA website has resources that are designed for freelancers. That said, there’s a lot to take in, so this post will go over some of the basics to help you with any fears or concerns that you may have.

Should I be filing taxes as a freelancer?

As a freelancer, you are obligated to report any income earned from your side hustle to the CRA. Regardless of the amount, even if it’s just a few hundred dollars, reporting is essential. If you don’t file your taxes, it’s tax evasion. In addition, by filing your taxes, you may become eligible for certain grants and government incentives.

To be clear, even if you have a full-time job, you still need to file your taxes for any income you’ve made on the side. Some people think you must register your business first, but that’s irrelevant as any money made is taxable.

If you invoice under your name, you are not legally obligated to register your business. However, if you prefer to invoice under a business name, you are required to register your business name in your province.

Tax Deadlines for Freelancers

Generally, the tax deadlines are as follows each year:

• March 1: RRSP contributions deadline
• May 1: Tax filing deadline for most individuals
• May 1: Deadline for any tax balance owing
• June 15: Tax deadline for self-employed tax returns

If any of those dates fall on a weekend, then the deadline is moved to the following Monday. Also, on leap years, the RRSP deadline gets moved back to February 29.

Knowing these deadlines is essential since if you miss any of them, you may be charged fees and interest. Even if you don’t have the money to pay any taxes owed, you should file your taxes on time to avoid any fees.

GST/HST Registration

Freelance taxes remain relatively simple when your income is less than $30,000 since you’re still considered a small supplier. However, you must register for a GST/HST number as soon as you pass that threshold. The CRA isn’t keeping tabs on you. It’s totally on you to keep track of your income and register when necessary. You also don’t need to wait until you make $30,000 in side income. You can register whenever you want, but once you register, you must collect taxes.

To be clear, the $30,000 threshold only applies to freelance income. It doesn’t matter if you’re making more than that from your regular job, you only need to get an GST/HST number if you make $30,000+ in freelance income.

When you’re ready to file your GST/HST, you can choose the quick method when it comes to reporting the taxes you’ve collected. This method mainly benefits service-based freelancers since it’ll simplify things when you do your taxes. Regular small businesses may want to stick to the traditional methods to maximize their credits.

Also, note that if you owe more than $3,000 in taxes in a year, the CRA will require you to start paying your taxes on a quarterly basis. Here’s a detailed guide I wrote on how to get an HST number in Canada.

Canadians with clients outside of Canada

According to the CRA, companies based outside of Canada are zero-rated, so you don’t need to charge them taxes. However, any income you earn from those clients must still be reported.

Since GST/HST registration applies to your income, you must still register for a tax number once you reach $30,000 in income, even if all of your clients are outside of Canada.

When you file your taxes, there will be a section asking how much of your income came from outside of Canada. You should report that separately from your Canadian-based income. The CRA likely won’t ask why you haven’t collected must GST/HST as they’ll be able to see that you had income coming from outside of Canada.

How much tax to set aside

Unlike full-time employees, freelancers are responsible for paying their own taxes. As a general rule, you should always set aside 25% of your income for taxes. However, you must set aside more if you’re in a higher tax bracket. Check your provincial tax brackets, so you have a rough idea of how much you’ll end up owing.

In addition, freelancers need to pay both employer and employee contributions to the Canadian Pension Plan (CPP), so that’s another expense or tax you need to factor in.

Anyone who collects GST/HST will eventually need to pay that back. The good news is that any GST/HST you’ve paid to your expenses will offset what you owe. In other words, you should have detailed records of your business expenses.

Eligible expenses for freelancers

The CRA website has a full list of expenses you can claim, but generally speaking, you can deduct any reasonable expenses related to the cost of your business. For casual freelancers, the following are things you’ll want to claim as expenses.

• Advertising
• Cellphone and internet bill
• Meals and entertainment
• Office supplies
• Travel
• Insurance
• Rent

Keep in mind that only the business-related portion of these expenses can be claimed. For example, if your home internet usage is 20% for freelance work and 80% for personal, you can only deduct 20% of your bills.

How you keep track of these expenses is entirely up to you. For the longest time, I tracked everything manually in Excel, but that’s because I happen to like spreadsheets. One digital option available is QuickBooks Self-Employed.

If these deductions are making your head spin, don’t worry. 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. Here are some ways you can save money on your taxes.

Using a business credit card

A common question freelancers and small business owners ask me is whether they should get a business credit card. It’s a personal preference, but it also depends on your situation.

If you’re a freelancer making limited income and having few expenses, you can use a personal credit card. You’ll just need to manually separate your personal expenses from your business ones when doing your taxes. Hopefully, you have one of the best travel credit cards in Canada or one of the best cash back credit cards so you can rack up those points.

For those who have frequent business expenses or just want things completely separate from their personal lives, a business credit card can make a lot of sense. Business cards typically give you a higher credit limit and a longer interest-free period. You also get detailed reports on your spending, which will be helpful when you do your taxes.

Best business credit cards in Canada

I have a detailed list of the best business credit cards in Canada, but here are a few to help you get started.

• Best welcome bonus: American Express Business Gold Card
• Best for travel rewards: American Express Business Platinum Card
• Best for no foreign transaction fees: Scotiabank Passport Visa Infinite Business Card

How to file your taxes as a Canadian freelancer

When you’re ready to file your taxes, you’ll fill out the T2125 form. This form is a statement of your business activities, covering your income and expenses. Even though you can still file your taxes by hand, most people tend to use other methods.

Using tax software

Freelance taxes for Canadians is easy if you’re using tax software. Which software you use is up to you, but I’ve been using TurboTax for a few years now since I like their suite of products, which includes:

• TurboTax Assist & Review Self-Employed
• TurboTax Full Service Self-Employed
• TurboTax Live Full Service

TurboTax is the only Canadian tax preparation software designed specifically for self-employed individuals. With TurboTax Assist & Review Self-Employed, you file your taxes online, but you have access to an expert who knows all about self-employment issues. What I mean is you can ask one of TurboTax’s experts questions while you’re filing your taxes. They’ll even review your taxes for you before you hit submit.

If you’re still intimidated by filing your personal tax return, use TurboTax Full Service Self-Employed. You can have an expert file your taxes for you. This is all done virtually, so there’s no need to leave your home.

Hiring an accountant

Hiring an account is a great idea if you’re uncomfortable doing things on your own or you haven’t filed your taxes in years. Even though accountants will cost you more than tax software, think of them as an expert that you have access to in case you have any questions. If you do plan on going the accountant route, be sure to look for one before tax season begins as they’re more likely to accept new cleints.

Final thoughts

This post is meant to be a taxes for freelancers quick guide. Handling your freelance taxes can become complicated pretty quickly which is why I recommend hiring a professional to help you with them. A good accountant won’t cost you that much and there’s a pretty good chance that the money they save you on taxes, will cover the fee you’re charged. 

Most freelancers don’t get a tax refund, but that’s arguably a good thing since you haven’t loaned the government money for free. It doesn’t matter if you’re a content creator on OnlyFans, or you’re an Uber driver, doing your taxes is a must.

Frequently Asked Questions

What can freelancers in Canada deduct from their income?

As a freelancer in Canada, you can deduct various expenses related to your work, such as:

• Office supplies and equipment
• Business-related phone and internet expenses
• Advertising and marketing costs
• Travel expenses for work purposes
• Professional development and educational expenses

How do Canadian freelancers determine their tax liabilities?

To determine your tax liabilities as a Canadian freelancer, you must:

1. Calculate your total income from freelancing and any other sources.
2. Subtract any applicable deductions.

Remember to account for any necessary GST/HST and CPP payments. You can also use an online income tax estimator.

What should freelancers with another job in Canada be aware of tax-wise?

If you have a side hustle in addition to your regular job, you should be aware that:

• Your combined income from all sources will determine your tax bracket.
• You may need to set aside a higher percentage of your freelance income for taxes.
• You can claim any expenses related to your business to lower your tax burden.
• RRSP contributions will also help lower your tax obligations.

Is it necessary for Canadian freelancers to register their businesses?

Freelancers in Canada are not required to register their business unless their annual revenue exceeds $30,000, in which case they must register for a GST/HST account.

What differentiates freelancing and self-employment for tax purposes in Canada?

In Canada, freelancers are considered self-employed for tax purposes. The terms are often used interchangeably.

Taxes are a fact of life, many people don’t understand what do property taxes pay for. In Toronto, they’ve been falsely told that our politicians have been wasting tax dollars but that simply is not the case. Property taxes pay for the services we use every day, whereas our Canadian income taxes cover major things like health care and employment insurance.

Regardless of where you live, if you want better services; taxes are what pays for them.

What property taxes in Canada pay for

Transit – Many people (myself included) complain about the transit options in Canada compared to other countries around the world. The thing is, those countries get help from the federal level to help pay for transit. In Canada, our provincial & federal governments help pay for expansions, but the day-to-day costs are funded from property taxes and cash fares. If we want better transit then we’ll need to pay or it.

Libraries – Some politicians complain that there are too many libraries and they’re a waste of money, this is ridiculous. Who wouldn’t want free access to books, movies, computers and programs?

Emergency services – Our property taxes pay for keeping our streets safe. In Canada, we’re fortunate to have excellent police services that help keep our crime rates down. Firefighters and paramedics also fall under emergency services and I’d rather not have those cut just to save a few dollars a year. We’re talking about life and death here after all.

Garbage / Snow removal – Breaking news, it snows in Canada. Ontario and Quebec were hit hard last year by the ice storm, and this past September Calgary got an early visit from winter. In both situations the local cities were able to quickly respond with snow removal because of their budgets which comes from property taxes. Money well spent.

Water supply &  waste treatment – Water is essential to life. Think about how many people out there don’t have access to clean drinking water. I’m happy to pay whatever for clean water.

Recreational programs – Recreational programs are possible because of the property taxes we pay. Swimming pools, ice rinks, tennis lessons, camps, parks, and drop-in programs are just a few things that we can take advantage of for free or on the cheap. Be sure to sign up early for these since they tend to fill up quickly.

Schools – It’s awesome to live in a country where getting an education is free. Some of our Canadian income taxes help pay for schools but it’s our property taxes that have helped introduce student nutrition programs at some schools.

Final thoughts
Property taxes in Canada also help pay for social housing, child services, road repairs and much more. In Toronto, we like to complain about high our property taxes are but surrounding cities actually pay more than those who live in the GTA. Regardless of where you live, understand that you can’t live in a great city without paying your share of fair property taxes.

It’s impossible to cut taxes and expect services to remain the same or to improve, hopefully, the people of Toronto have elected a new Mayor that understands this.

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.

Final word

Whether you make money on TikTok or sell art on the side, 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.