Taxes and the Gig Economy in Canada
What is the Gig Economy?
The gig economy is defined as one in which temporary, flexible jobs are much more common and companies lean more towards hiring independent contractors and/or freelancers instead of full-time employees. A common example of a job in such an economy is an individual who works as a driver for Uber or Lyft, or operates as an Airbnb host.
I work for the Gig Economy, but I don’t know how to complete my Taxes
To complete your return, you will need to gather information with respect to your income, your expenses (i.e. mileage driven, etc.) . Furthermore, you will also require:
- Your Annual Tax Summary from whichever mobile application or website that tracks this information (if applicable);
- Receipts, bills and statements for all tax deductible expenses;
- Your vehicle mileage from the beginning of the year, the end of the year, and separated between personal and business kilometres driven (if applicable);
- Your Social Insurance Number; and
- Any other tax documents and slips related to any other employment you may have.
What Tax Form Should I Use?
Most individuals in the gig economy, such as Uber drivers, for example, would fill out the T-2125 form, the statement of professional or business activities. If you are renting out a property, for example, you would have to fill out a T-776 statement of real estate rentals form.
What Expenses May I Deduct?
It is worth noting that there are business costs that you may be able to claim either full or partial tax deductions for. Put simply, any money spent directly towards or related to your gig is a legitimate business expense.
If you are an Uber or Lyft driver, for example, business expenses can include:
- Maintenance expenses (gas, oil, windshield washer fluid, new tires, tune-ups, etc.);
- Car washes;
- Vehicle insurance;
- Transponder for toll roads, tolls or parking costs;
- Cell phone expenses;
- Uber booking fees;
- Freebies for riders (water, candy, etc.);
- Cell phone mounts;
- Phone accessories (chargers, auxiliary cords and hands free headsets)
- Car loan interest; and
- Accountant or bookkeeping fees.
If you are an Airbnb host, for example, business expenses can include:
- Cleaning fees;
- Rental commissions;
- Netflix or cable bill; and
- Linens, sheets, toiletries.
If you are an independent construction contractor, for example, business expenses can include:
- Steel-toed boots;
- Hard hats;
- Tools; and
- Any other materials you need to work on site.
GST/HST and the Gig Economy in Canada
It is also essential to be aware that in a gig economy, sales taxes must be remitted to the government. If you are self-employed and your earnings exceed $30,000, you must register for a GST number. If you are a driver for one of the ride-hailing companies, you must register for a GST (and a QST number in Quebec) number regardless of your earnings. While some businesses, such as Airbnb and Uber, track your sales taxes through their mobile applications, it is still up to you to remit the taxes yourself.
You should also note that, as an independent business, if you have legitimate business expenses on which you paid sales taxes you are able to claim a tax credit for the GST/HST incurred by declaring input tax credits.
Have questions, concerns? Contact us and let us help you maximize your business expenses, maximize your savings, and ensure you remain well informed when it comes to what is an appropriate expense to claim, how GST/HST works, and with more complex situations, such as having multiple incomes, or multiple jobs. We are here to help!
This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.