Let’s talk about… BUSINESS EXPENSES!
Also known as “write-offs” or “deductions”, these are the things that make a lot of us feel like David in this scene of Schitt’s Creek… 😂
Still feeling like David?
Keep reading, friend. 😎 All will be answered below!
WTF is a WRITE-OFF?
Also known as a business expense, a tax write-off, or deduction, these terms refer to “any cost made that is necessary to generate revenue for your brand or business.” For you, fellow artist, this means anything you spend money on that is necessary for producing or maintaining your creative practice.
🎨 As a visual artist, you purchase paints and canvas to create a new masterpiece. Biz expenses! Why? Supplies!
🩰 As a performing artist, you pay for new headshots and someone to do your makeup. Biz expenses! Why? Advertising. Those pics are gonna get you booked!
🎭 As a theatre artist, you buy a ticket to (finally) see Hamilton. Biz expense! Why? Research! You need to know what’s happening in the industry!
Business expenses = stuff you buy that’s necessary for your business aka your creative practice. 👍🏽
What does ‘deductible’ mean?
As working Canadians, we have to pay tax on all of the income we make.
Deducting (aka subtracting) our business expenses from the income we make decreases the amount of tax we have to pay.
Here’s an example with some numbers:
Say you make $15,000 in self-employed income from your art gigs in 2023.
If you do NOT claim or report any expenses, you would have to pay tax on the WHOLE $15,000.
But! Maybe, in order to make that money, you had to spend:
- $500 on costumes
- $1,000 on a photoshoot
- $5,000 on rehearsal space
All those expenses total up to $6,500.
If we subtract all the expenses from our total income we end up with $8,500. ($15,000 – $6,500 = $8,500)
This means you only have to pay tax on $8,500 INSTEAD of $15,000 because you claimed those expenses! 😃
TLDR: the more expenses you claim, the less tax you have to pay… within reason.
How do I know if something I buy counts as a write-off?
Ask yourself: did I need this for my self-employed work?
Yes? It counts!
Kinda, maybe, but not sure? Keep the receipt. Document the purchase.
ALWAYS err on the side of keeping TOO MANY receipts vs. too few. Sai (or whoever does your taxes!) will be able to maximize your tax deductions to make sure that you claim what is fair and reasonable, in the eyes of the CRA. It’s always better for us to have more stuff to work with than not enough because it ensures you pay the least amount of tax possible. This is why Sai tracks all your transactions, so nothing slips through the cracks.
This is also where it really pays (literally) to have someone do your taxes who gets what you do. Because we’re able to add categories to capture expenses that don’t fall into the CRA’s regular ones. For example, when doing taxes for dancers, Sai adds categories for Physical Care and Aesthetics – stuff like massages or spray tans – that the CRA doesn’t understand. AND if they do happen to have any questions, we’re here to back you up and explain your expenses to them 😎
What is the best way to keep track of my expenses?
You should probably TRY SAI! 😃 [click here to join the waitlist!]
Ultimately, no matter if you’re doing your expense tracking with a bookkeeper, a software (🙋🏽♀️), or in Google Sheets, there’s a few things you want to keep in mind.
⭐️ Keep ALL your receipts! Better yet, keep digital copies of all your receipts so you don’t have to worry about them fading. You’ll want to make sure you have an itemized receipt AND the debit or credit slip so that you have proof of tax and/or tip paid. Make sure you keep them clearly labeled + organized so you can easily find them if the CRA has questions.
⭐️ Document all your expenses. For every receipt you have, you should document the purchase in a spreadsheet so you can track all of the following information:
- Date of Purchase (when you bought it)
- Vendor (where you got it)
- Item (what you got)
- Category (what kind of expense it was – supplies, training, research, etc.)
- Subtotal (what you paid before tax and tip)
- Tax (what tax and how much you paid – i.e. 13% HST, 5% GST, etc.)
- Total (total amount you spent on your purchase)
- Notes (anything you want to make sure you remember!)
Feeling like this is a whole lotta work to add to your creative hustle? 🙃
That’s literally why we made Sai. Because we know y’all don’t have time for this!
- Track + organize all your expenses for you
- Give you estimates of how much tax you owe each month, so you can put that money away and NOT spend it lol
- File your taxes at the end of the year!