The tax season is important for every blogger. Given my dual identity as a CPA candidate and a blogger, I thought it would be really useful to share with you some tax tips for bloggers so you can file your taxes with confidence.
Before we begin, I’d like to first share some caveats:
The rules are Canadian-specific
Note that I am based in Canada, so all the taxation rules below are for Canada-specific. However, the general rules and deductions do not necessarily change, so you may still find this post useful.
This guide is largely only suited for independent bloggers like myself
This guide assumes that you are filing taxes as an individual. If you have set up a Canadian-controlled private corporation (CCPC), then the rules are quite a bit different and a lot more complicated.
The regular filing deadline is April 30th. However, if you are a blogger, you qualify as a sole proprietor. This is true even if you have a regular 9-5 job. As such, your deadline for filing your tax return is June 15th.
Your spouse’s filing deadline is also impacted. Your spouse can file his/her tax return with the same deadline, i.e., June 15th.
Balance due date
Note that the balance due date is very different from the filing deadline. Even though you have until June 15th to file your taxes, you must pay your taxes owing by April 30th. This is why I recommend that you file your taxes by April 30th as well instead of waiting until June 15th. I mean, you have to know how much taxes you owe by the end of April anyway.
The tax package that you will use is T1. This is the package to use if you are reporting income as an individual. T2 is for corporate taxes.
The tax form that you have to fill out for your blogging income is T2125 Statement of Business or Professional Activities.
Note that T2125 is only for your blogging income. You still need to file your T4s for your regular corporate job income, T5 for your investment income, T5008 for your securities transactions (to calculate your taxable capital gains and allowable capital losses), etc.
If you have multiple side-hustles, for example, if you are an actress and a blogger at the same time, then you may have to file multiple T2125 forms.
Tax tips for bloggers: How to fill out T2125 as a blogger
Business income vs professional income
As a blogger, you earn business income (rather than professional income). Professional income is usually reserved for those who are governed by a licensing body (e.g., dentists, doctors, engineers, lawyers, etc).
This declaration indicates when your year-end is. For simplicity, your year-end should line up with the calendar year-end, which is December 31st.
Main product or service
You should describe what you do. For me, I simply put down “blog bellawanana.com”.
Industry code – 711513
This one took a little bit of research, but 711513 – Independent writers and authors is the right North American Industry Classification System (NAICS) code for you.
Here is a brief explanation of what this comprises, taken directly from the Statistics Canada website.
This Canadian industry comprises independent individuals (freelance) primarily engaged in creating artistic and cultural literary works, technical writing or copywriting.
- authors, independent
- composers, independent
- freelance journalist
- ghost writers, independent
- independent advertising copywriter
- independent print journalists
- journalists, print, independent
- news correspondents, independent
- newspaper columnists, independent
- playwrights, independent
- poets, independent
- reporters, independent
- screenplay writers, independent
- script writers, independent
- song writers, independent
- technical writers, independent
- writers, independent
Income includes near-cash & goods!
You should include income that you received through cash and electronic fund transfers (ETFs). However, you must also include items like near cash. The most used example is gift cards. If someone pays you with a gift card, then that is considered income and you need to declare it on your T2125.
Instead of paying cash, many companies have also been paying bloggers goods (e.g., free t-shirts, free cakes, makeup, etc) in exchange for a blog post, for example. If that’s the case with you, you need to declare the fair market value of the goods in your income as well.
The following expenses are the most common ones deductible for a blogger:
Google ads, Facebook ads, giveaways, any money that you spent to promote your blog is deductible against your income. You should report these expenses under Advertising.
Meals and entertainment costs
No, you cannot claim the takeouts you order because you need to finish a gig and didn’t have time to cook. Only reasonable expenses are allowed. For most of us, this category of expenses should be minimal in 2020 because of the pandemic. However, in normal times, you may want to take your clients out to dinner or a sporting event, and 50% of the cost is deductible.
Membership fees and subscriptions
If you are a blogger, you may have purchased recurring subscription services to help you run your blog better. All of these expenses are business-related and deductible.
Web hosting fees & domain names
As a blogger, you most likely have to pay hosting fees and pay for domain names. You should deduct these expenses under office expenses.
You may declare your printer ink, paper clips, paper, pens, staples, record-keeping supplies that you used for your business under “Supplies”.
Bank, PayPal and other fees are also deductible. They should to under “Management and administration fees”.
If you travelled to attend a bloggers’ conference, then you can deduct the relevant expenses under this bucket.
Travel expenses include public transportation fares, hotel accommodation, and meals. The 50% limit also applies to the meals and entertainment cost when you travel.
Rent, maintenance, property taxes, etc
These are deductible. However, they are only fully deductible if you rent a separate space away from your home. If you work from home for your blogging endeavours, then you need to fill out the section for business-use-of-home.
You can deduct the expenses based on the square footage of your work area. If you work in a common area, then you need to pro-rate it based on time spent working there.
If you have a spare room that you use to blog and the room occupies 10% of your home, then you can deduct 10% of all the expenses deductible.
If you work in the living room for 20 hours a week (there are 24 x 7 = 168 hours in a week) and the room occupies 20% of your home, then you can only deduct 20% x (20/168) = 2.4% of all the expenses.
Common deductible home expenses
- Maintenance and repairs
- Mortgage interest
- Property taxes
- Internet bills (in the unlikely event that you only use the internet because of blogging, then you can deduct it under “telephone and utilities”)
Note that maintenance and repairs are 100% deductible if the expense was made exclusively to your designated work area.
Another note is that you cannot use business-use-of-home to create a business loss. However, you can carry forward the amount into the future.
Capital cost allowance (CCA)
Capital Cost Allowance (CCA) is how Canadian businesses may claim depreciation expenses for calculating taxable income under the Income Tax Act (Canada).
This means that if you purchase or use assets such as a laptop or a cell phone, you CANNOT expense them in the year you bought them. These are capital assets, and they must be depreciated according to the rules set up by the CRA.
The Income Tax Act has categories all the depreciable assets into different CCA classes. When you want to declare capital cost allowance, you must first determine which classes your assets fall into and follow the rules.
Laptops belong to CCA class 50, with a CCA rate of 55% (declining balance).
Suppose you bought a laptop for $1,000 (tax included). At 55% rate, you can claim CCA of $1000 x 55% = $550 in the first year. However, because of the accelerated investment incentive (a rule in effect from October 18, 2018, to December 31, 2023), you can actually claim $1000 x 55% x 1.5 = $825 in the first year.
If in the same year, you also disposed of an old laptop that was used for business purposes for $100, then you can only claim ($1000 – $100) x 55% = $495. Because the cost of the addition ($1000) is greater than disposal ($100), the accelerated investment incentive still applies. Note that if the disposal is greater than the addition, that you cannot apply the 1.5 factor.
The most common CCA classes that a blogger may use are:
Class 8 (20% declining balance)
- Furniture and fixtures
- Office equipment, including fax machines, photocopiers, and any equipment not included in another CCA class
Class 12 (100%)
- Library books
- Tableware & kitchen utensils costing less than $500
- Tools costing less than $500
- Computer software that is not systems software (e.g., tax software would fall under this category)
Class 50 (55% declining balance)
- Computer hardware and systems software acquired after March 18, 2007, and before January 28, 2009; and after January 31, 2011
Tax tips for bloggers: Additional notes
If you receive income in USD or any other foreign currency, remember to use the conversion rate provided by the Bank of Canada to calculate the CAD equivalent.
If the transactions are far and few in between, then you should use the foreign exchange rate on the day you complete the transactions. If the transactions happen regularly, then it is acceptable to use annual exchange rates published on the Bank of Canada’s website.
Do break down all the expenses
You need to break down all the expenses and categorize them into appropriate buckets (e.g., supplies, business-use-of-home expenses, etc). Lump-sum expenses could easily trigger an audit from the CRA.
Keep all your records
Make sure that you keep copies of all your receipts, invoices, etc. In case of an audit, you will need to provide all of these records as proof.
For individuals, the CRA can reassess up to three years after the date on the original notice of assessment. However, under special circumstances, a reassessment can be done up to 10 years after the end of a taxation year. So make sure that you keep track of all your expenses and revenue neatly; you may not remember all the details in 10 years!
Consider using a tax software to help you with your return
If you feel a bit overwhelmed with the above information, you can consider using a tax software, such as Credit Karma Tax (US) or Wealthsimple Tax (Canadian) to help you with your return. You can easily claim all credits and deductions, whether you’re a freelancer, side-income earner, independent contractor, or a small business owner. I personally have been using Wealthsimple Tax for years, and I have always been pleased with the results (and the tax refund, of course)!
Check out the blogging tools I use!
- Bluehost: perfect for beginners who want to upgrade from a free platform (so you can start monetizing) but who also want to minimize spending. Check out my Bluehost review to see why I chose it as my first hosting company. Sign up for Bluehost here.
- NameSilo: One of the most economical registrar and hosting companies out there. I stumbled upon this company and have been very happy with the service. It is my current registrar. Use promo code “bellawanana” at check out to get a special discount! Sign up for NameSilo here.
- SiteGround: This is my current hosting company. It is more expensive than Bluehost, but I like it for its SiteGround optimizer plugin, the free email accounts, and the better speed with my site. Sign up for SiteGround here.
- Ezoic: This is the ad network I have joined. It pays quite a bit better than Google AdSense. If you have over 5,000 pageviews a month, you should definitely consider applying for it! Sign up for ezoic here.
I hope you find the above tax tips for bloggers useful in helping you navigate your tax season. If you have any questions, please don’t hesitate to leave a comment below or send me an email at firstname.lastname@example.org!
If you are looking to know what personal tax credits are available, make sure to check out my post Personal Tax Credits You Can’t Miss!