Last updated on December 1, 2020
Here’s Part 2 of Mark Cappello’s classic post on taxes, read it and use it.
Thanks to everyone who read or commented on Part 1 of this 2-part article. People had great input, and hopefully this conversation helps clarify this complex aspect of the field.
As a freelance or self-employed artist one of the most challenging things to keep track of is all of your freelance receipts. It is often difficult to discern which receipt is a write-off and which isn’t, and of course we always try to write-off everything we can to reduce our tax bill with the CRA. I would advise anyone to not ‘stretch’ too far to write something off, the risk is too great and audits are too painful. I subscribe to the notion that taking a risk at tax time is just too stressful, and if it were to come back and bite you it is likely to be a miserable experience.
With that word of caution in mind, here are the standard categories for your personal income tax, these categories are understandable to any accountant and prepping them this way will make their job easier and therefore cheaper for you. Use these categories to separate your receipts. I recommend getting some manila envelopes, label the envelopes with these category headings, and place COPIES of your receipts and bills in the proper envelopes. Copies are always best, as you wouldn’t want to lose the originals.
Home Based Business Expenses
-{f2e86ea6af82e2bb048871abf045622abf0ed27fb513932dc1ee8c05a54cbefd}Rent (measure your office space, and find out it’s square footage {f2e86ea6af82e2bb048871abf045622abf0ed27fb513932dc1ee8c05a54cbefd} of your overall apartment/condo, that percentage of your rent should be your tax deductible amount). Your ‘office space’ should be a dedicated space, or this formula may not apply to the same degree. Give your accountant both your total rent and your square footage percentage.
-{f2e86ea6af82e2bb048871abf045622abf0ed27fb513932dc1ee8c05a54cbefd}Mortgage (use same measurement formula as your rent).
-Mortgage interest.
-Home/Apartment Insurance
-Power/Hydro Bills.
-Gas Bills.
-Property Tax Assessment.
-Water/Sewer Bills.
-Website creation costs
-Business Card costs
-Computer Assets (Hardware, monitors, Cintiqs, tablets, scanners, printers, etc.)
Repairs and Maintenance
-Hardware Receipts
-Home Improvements
-Equipment Repairs
Meals and Entertainment
-These should be ‘business meeting’ meals, not individual meal receipts, unless you were traveling for business.
-Movie theatre receipts
-Staff parties
Education and Self Improvement
-Continued education course receipts
-Industry event receipts (OIAF, TV conferences, etc.)
Postage and Courier
-Postal receipts (Canada Post, stamps)
-Shipping receipts (Fed Ex, UPS)
-Courier receipts (local delivery)
Telecommunications
-Monthly internet bills
-Web Hosting costs (FTP hosting, webmail hosting)
-Telephone bills
-Specified long distance charges OR long distance plan costs (I’ve found it’s better to have an inclusive plan for all long distance which can be written off 100{f2e86ea6af82e2bb048871abf045622abf0ed27fb513932dc1ee8c05a54cbefd} over a price per minute plan where each long distance call needs to be justified as a business expense)
-Cell Phone bills
-Cost of Phone equipment (home phones, cell phones, answering machines)
Travel Expenses
-Flights, rail travel, buses, etc.
-Hotels and accommodations
-Rental Cars
-Extra Luggage fees and all associated costs
-Bus costs (monthly pass or individual costs)
-Taxi fares
Stationary and Supplies
-All art related supplies
-Any related book costs (art of books, how to books, reference books, etc.)
-Comic book costs (justified as style reference, or related/shared field, but be careful here, some tend to try to write off too many comics)
-Paper costs
-CD and DVD receipts (justified in relation to film-making, style reference, music reference)
-Software (computer programs)
-Small hardware (Jump Drives, recordable CDs and DVDs, Wacom pens)
-Inkjet Cartridges, etc.
Vehicle Expenses
-Gas and Oil
-Car Insurance
-Car Repairs and Maintenance
-Parking Receipts
-Toll bridge receipts
Please feel free to add any comments or questions that can expand these lists or clarify these categories. Good luck with your taxes, and keep these write-offs in mind when you’re collecting your receipts for next year. Cheers! ~M
Thanks so much for these articles Mark. They are gold!
Thanks for writing these articles! Being someone who is starting to get into freelancing / business, there have been some invaluable tips that will likely save me time and money. Awesome blog 🙂
Nice one fellah. Good on you.
Beautiful work, Mark C. A couple of things I’d throw in, as per my accountant’s advice:
re: comics, books, DVDs, etc – be careful as legally these must be supplies used up in the course of your work – ie copy paper. So, as you advised, be cautious with that stuff – an exception could be if it’s a licensed property (ie – Scaredy Squirrel) and you bought up some other incarnations of the property or characters for ref (sculpts, storybooks, comics).
re: $30K threshold and above – if you regularly hit $30K per trimester, that’s anywhere from $60K to $90K per annum. Spend the money to get incorporated and take advantage of the same tax breaks as any other incorporated company (Ford, Air Canada, small businesses, you). You will put more money in your pocket in the long run. AND – if that incorporated entity goes bankrupt for any reason (litigation, clients never paid on time, etc), it won’t affect your personal financial standing because legally, it isn’t you, it’s a company that you created. You can simply create a new legally incorporated company (for a fee) and continue.
re: tracking receipts – don’t bother hoarding pieces of paper. Simply use one credit card for every business expense. That way, you have a monthly summary of every single write-off for that month. Way easier to tally up your expenses at the end of the year with 12 statements.