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Tax Write-Offs for Independent Contractors

Expert: Julie King

Lu asked:

Would it be possible to get a list of potential tax write-offs for independent contractors?

Julie King answered:

When you are an independent contractor the Canada Revenue Agency (CRA) considers you to be a business, providing that you meet their tests for qualifying as a business. I have provided a link below that outlines valid business expenses, but before you read that please consider the way that different purchases are handled.

There are two main ways that you accumulate tax write-offs in a business:

  1. You purchase consumable goods that you use within a 1 year period in your business and you deduct these "expenses" from the money you earn as a consultant during that year.

  2. When you purchase an assets that will be used for more than a year in your business, such as a car, you cannot deduct the full cost of these purchases immediately. Instead, you will deduct a portion of the purchase price of your "capital assets" each year as a depreciation expense. CRA has formulas that determine how much of the asset's value can be deducted each year. The formula used to make this calculation is known as the Capital Costs Allowance (CCA).

CRA has an online guide that explains both income and expenses; if you are thinking of going into business for yourself as an independent contractor you will want to read this carefully, as you must do specific things such as keeping receipts for a certain period. CanadaOne's Starting a Business Guide also has information that will help you get started.

Here is the CRA Guide to business expenses:

I hope that answers your question!

Yours truly,

Julie King

About the author

Julie King is the co-founder and managing editor of CanadaOne, Canada's first small business portal.

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