Taxes
Self-employed and doing your taxes for the first time? There are a few tools you can use to help you get an idea of how much you will owe the CRA. Keep reading to learn more about our best Canadian tips to calculate taxes.
What is the best way to estimate your taxes?
If you are self-employed or run a small business, we have good news. You can reduce the amount of tax you will owe at the end of the year by claiming expenses. To streamline this process, you'll need to get organized and plan ahead. Keep a spreadsheet of your expenses throughout the year. These may include office supplies, inventory, and advertising expenses. If you work from home, you will also be able to deduct a percentage of your rent and utility bills. Ideally, you should have a system in place to keep track of your invoices. Some people like to keep this information in a spreadsheet, although there are subscription services that can simplify the process for you. Some popular ones include Freshbooks and Quickbooks. Add up all amounts you made last year, and deduct your expenses and any RRSP contributions made before March first of that tax year. This will give you your net income, which is the amount you will use to calculate your taxes. Of course, there are other deductions you can claim to further reduce your tax burden. But, deducting your business expenses and RRSP contributions will give you a general idea of your balance owing.
How to calculate your taxes
There are a number of online income tax calculators you can use to estimate how much tax you will owe. However, many of these estimate taxes as if you were a salaried employee. As a self-employed Canadian, that's not what you want. TurboTax has a self-employed income tax calculator you can use. Make sure you input your income on the "self-employment income" line. If you earned both self-employment income and employment income last year, the calculator can handle that too. If you'd prefer to estimate your taxes without using a tool, be aware of the following:
