As a small business owner, you might be wondering what you can claim as personal expenses on your taxes this year. Here’s what you need to know when it comes to doing your taxes for your business or side hustle.
Expenses You Can Claim
The CRA defines business expenses as certain reasonable costs that are incurred for the purposes of earning income and can be deducted for tax purposes. Personal, living, or other expenses unrelated to the business can’t be deducted for tax purposes.
In general, any money spent running your business is considered a business expense, including motor vehicles and office supplies, but if you’re unsure about whether an expense you want to claim as a deduction is reasonable, it’s best to check with an accountant.
It’s good practice to keep a separate business account in order to easily distinguish between business and personal expenses, and our financial advisors at Encompass Credit Union can help you do so. Although many smaller business expenses are often overlooked, claiming them when you file your taxes can really add up and minimize your tax obligations!
The Impact of Starting a Small Business on Your Taxes
Many people wonder whether starting a small business for their side hustle will make filing their taxes easier or more difficult.
If your side hustle has earned you enough money to bump you up to a higher tax bracket, you can consider starting a small business to claim business expenses and reduce the amount of taxes you owe.
When Do You Need to Pay GST on Your Extra Income?
When your independent sales reach $30,000 yearly you’re required to register for GST/HST and begin paying it. However, you may want to register before hitting that threshold so you can recoup the GST/HST you’ve been paying for goods and services used for your business.
When Do You Need to File a Tax Return for Your Side Hustle?
There are almost 1.1 million small and medium-sized enterprises (SMEs) in Canada. Just like your main source of income, any income earned through a side hustle in a self-employed capacity must be reported on Form T2125 Statement of Business or Professional Activities.
Just because your profit doesn’t necessarily appear on your T4, you still have the responsibility to report the income you earn to the CRA. Tax returns should be filed on time by April 30, and although unincorporated proprietors have until June 15, you’ll still be charged interest after April 30.
At Encompass Credit Union we provide expert advice to help your small business or side hustle experience great success! Give us a call at (780) 842-3391 or visit us online and see how our exceptional staff can help you today.