Tax Deductions Available to Independent Contractors

Arvind Seth
| 8/5/2022
Desk and Chair

If you are considering becoming an independent contractor in Canada, there are many life and business implications you should be aware of before making the transition. Crowe MacKay’s trusted tax experts share important considerations, including available tax deductions, that will help you make an informed decision as you navigate the next steps of your career.

Already an established contractor? Review our list of common tax-deductible expenses to ensure you are getting the most from your taxes.

What are the benefits and draw-backs of being an independent contractor? 

  • $541 M over 3 years for Calgary LRT projects.
  • $429.7 M over 3 years for Deerfoot Trail upgrades.
  • $282 M over 3 years for the Springbank Off-Stream Reservoir Project.
  • $166 M over 3 years for the Calgary Cancer Centre.
  • $134.2 M over 3 years to complete the Calgary Ring Road.
  • $84.7 M over 3 years for the Peter Lougheed Centre Emergency Department, Mental Health Intensive Care Unit and Laboratory Redevelopment.
  • $63.6 M over 3 years for the Foothills Medical Centre.
  • $59.2 M over 3 years for the Glenbow Museum revitalization.
  • $57.1 M in 2024-25 to support the Bethany Care continuing care modernization project.
  • $48.6 M over 3 years for the University of Calgary’s Veterinary Medicine expansion.
  • $22 M for the Office of the Chief Medical Examiner for a new facility to address population growth.
  • $15 M over 3 years for the Repsol Sport Centre.
  • $2.1 M in 2023-24 to expand the aviation program at Mount Royal University.
  • $9.5 M over 3 years for a world-class gallery development at the TELUS Spark Science Centre.
  • $7.5 M capital grant for the WinSport Day Lodge Renovation.
  • $7.5 M in 2023-24 to accommodate a charter school program in Calgary.
  • $5 M for Multidisciplinary Hub planning at the University of Calgary.
  • $2.6 M for the Calgary Zoo Canadian Wilds redevelopment.
  • $1.9 M for the SAM Centre (Calgary Stampede Foundation).
  • $0.8 M for the Kids Can Catch Trout Pond at the Bow Habitat Station.
  • $1.2 M for the University of Calgary’s Faculty of Veterinary Medicine Lab, to ensure critical diagnostic capacity at a lower cost.
  • $3 M over 3 years for planning the North Calgary/Airdrie Regional Health Centre.
  • $50 M for Charter Hub and charter school expansion in Calgary.
  • $760 million over 3 years for Edmonton LRT projects.
  • $634.1 million over 3 years for the new Edmonton hospital.
  • $138.5 million over 3 years for the Yellowhead Trail freeway conversion project. $92.3 million over 3 years for the Terwillegar Drive expansion project.
  • $90.6 million over 3 years for the Gene Zwozdesky Centre at Norwood.
  • $63 million in 2024-25 to support the Good Samaritan Society continuing care modernization project.
  • $35 million in 2024-26 for MacEwan University’s new building for the School of Business.
  • $22.4 million grant to eliminate the at-grade rail crossing at 50 Street.
  • $7.9 million for the Misericordia Community Hospital modernization.
  • $4 million in new funding in 2023-24 for repairs and upgrades to the Citadel Theatre.
  • $3.2 million in additional planning funding for the Edmonton Law Courts.
  • $3 million over 3 years for the continued planning of a new, standalone Stollery Children’s Hospital.
  • $3 million in 2025-26 for the Ray Gibbon Drive upgrade project.
  • $2.5 million in 2023-24 with an additional $900,000 in 2024-25 and $300,000 in 2025-26 for the Designated Industrial Zone (DIZ) Pilot Project, in Fort Saskatchewan and Edmonton.
  • $6 million over 3 years for the design of a new school in Glenridding Heights.
Note: You can always obtain a ruling from the CPP/EI Rulings Program or review CRA’s publication Employee or Self Employed? to ensure that your working arrangement is clear before you begin working as a contractor.

Deductible Expenses Available to Independent Contractors

As an independent contractor, you are eligible to claim certain expenses incurred for business purposes on your taxes.

Deductible Expenses

  • Home office (as a percentage of your space vs. size of home)
  • Mortgage interest
  • Repairs
  • Property taxes
  • Insurance
  • Utilities

Principal residence rules need to be considered prior to converting space to a home office.

  • Vehicle
  • Gas
  • Toll charges
  • Repairs
  • Parking
  • Insurance
  • Tax depreciation
  • Supplies and tools
  • This includes any supplies required to complete duties and activities associated with your field of work.
  • Computer and software expenses
  • Computers can be deducted at a rate of 55% per year.
  • Software is 100% tax deductible where 50% can be claimed in the year of purchase and the remaining balance can be claimed the following year.
  • Meals and entertainment
  • This is generally deductible at a rate of 50% as long as you are meeting clients, suppliers, and prospects

Crowe Tip: Always be sure to keep your receipts, including the itemized receipt.

  • Travel
  • Airfare
  • Hotel
  • Transportation (taxis, ride share, public transit, etc.)

Crowe Tip – Tracking Income and Expenses

To stay organized, make sure to keep all your receipts in one spot and use Crowe MacKay’s fillable form where you can easily input your income and expenses when submitting your taxes.

Download the Form Now 

Person Realtor Showing Home

Personal Services Business

Organizations that have incorporated or are considering to incorporate may be deemed as a personal services business (PSB). Generally, PSB’s are viewed differently by the CRA and will have different tax obligations - real estate professionals are a great example of PSB.

Overview of the PSB Criteria

  • Income of the business is derived from those services rendered by an individual (commonly referred to as an “incorporated employee”) and that person is also a specified shareholder (that is owning 10% or more either directly or indirectly of the company or related entity);
  • The incorporated employee is an officer or an employee of the company for which services are being provided if the corporation were to be “disregarded;” and
  • Throughout the year, the corporation did not employ more than five full time employees.

Learn more about the PSB criteria

Personal Services Business Tax Obligations

When the PSB rules are in effect, the income derived from a PSB will not be eligible for the small business deduction. Certain deductions usually claimed by a corporation against PSB income will likely be restricted as well. Therefore, the corporate income tax rate for PSB income will be higher.

There are strategies available to navigate this complex area that are beyond this article. If you require assistance with this, or any other topics presented through-out this article, connect with us in Alberta, British Columbia, Northwest Territories, or the Yukon.

This article has been published for general information. You should always contact your trusted advisor for specific guidance pertaining to your individual tax needs. This publication is not a substitute for obtaining personalized advice.

If you are looking for Tax Services, Crowe MacKay provides personalized support. Our tax professionals will help you maximize tax-planning opportunities and ensure the minimum amount required by law is paid.

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Connect with a trusted Crowe MacKay advisor to discuss your specific situation by calling us toll-free at 1 (844) 522 7693, emailing [email protected], or by completing the form.
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