Why You Should Think About Your Tax Strategy Year-Round if You're Self-Employed

Adopting a year-round tax strategy is something you need to consider if you're running your own business. This proactive approach to tax planning can help you stay on top of your financial obligations and ensure your preparedness for tax season.

For example, if you've been monitoring your income and expenses every month, tax bills are less likely to come as a surprise, making it easier for you to manage your cash flow.

It's important to note that for self-employed individuals—which includes sole proprietors (unincorporated businesses with one owner), consultants, and freelancers—the 2025 tax filing deadline in Canada is June 15, 2026.

To get in the best position to file, this article explores the key benefits of having a tax strategy, provides tips on maximizing your tax efficiency, and outlines what you can write off as a business owner in Canada.

The benefits of a year-round tax strategy

If you're self-employed, taxes aren't just a once-a-year concern. Whether you’re a freelancer, consultant, or small business owner, it's crucial to think about your tax obligations throughout the year. Having a year-round tax strategy can:

• help you minimize your tax liability.
• make your business more profitable.
• increase your savings.
• create greater financial clarity and flexibility.

For example, by monitoring your taxable income throughout the year, you may avoid penalties and interest on underpaid taxes or taxes that are paid late. Additionally, continually staying on top of your tax obligations allows you to manage your cash flow more effectively and avoid any unpleasant surprises when tax season arrives.

Understanding self-employment tax laws and changes

Staying informed about the latest tax laws and how they impact your business is important for optimizing your tax strategy and avoiding potential pitfalls. One important aspect to be aware of is the Goods and Services Tax/Harmonized Sales Tax (GST/HST) registration and remittance.

In Canada, GST and HST are taxes that businesses may be required to charge on the sale of goods and services. If your total revenue from taxable supplies or services exceeds $30,000 over 4 consecutive calendar quarters, you must register for a GST/HST account. Once registered, you'll be required to collect GST/HST on your sales and remit the tax to the Canada Revenue Agency (CRA).

To calculate how much GST or HST you owe, add up all the GST you collected and subtract the amount of GST you paid during the period for your GST report. Commonly, this is quarterly or annually, depending on the size of your business.

Ways to reduce your self-employment tax

A big part of reducing the amount of tax you pay can include maximizing deductions and contributing to registered savings plans. Here’s how you can strategically reduce your tax burden year round:

Maximize eligible tax deductions

Ensure that you are claiming all eligible business expenses, such as home office costs, vehicle expenses, and supplies. But proper documentation is key. Be sure to keep details of all expenses, including receipts, so there is no question about their deductibility if you are ever audited. One benefit TurboTax offers is Audit Defence, which gives full-service representation in case you're audited by the CRA.

If you're unsure whether you can deduct an expense, TurboTax Assist & Review Self-Employed features tax experts that can help you with claiming expenses and deductions for your business as well as guide you on other aspects of filing.

Contribute to a registered savings plan

Contributions to a Registered Retirement Savings Plan (RRSP) can significantly reduce your taxable income. The more you contribute (up to your allowable limit), the less tax you’ll pay. This is because RRSP contributions are tax deductible, meaning they lower your overall taxable income for the year, effectively placing you in a lower tax bracket and reducing the amount of tax owed.

Another savings plan to consider that allows you to claim a tax deduction for saving money is the First Home Savings Account (FHSA). An FHSA allows you to save for your first home while deducting contributions to the account from your taxable income.

Additionally, the income earned within the RRSP and the FHSA isn't taxed until you withdraw the money, allowing your investments to grow tax-deferred.

What can be written off as a self-employed business owner in Canada

As someone who is self-employed—but not incorporated—you have the opportunity to write off many of your business-related expenses throughout the year. These deductions can help reduce your taxable income, saving you money on your taxes.

Common categories of deductible business expenses include:

• Office expenses. Costs related to running your business, such as office supplies, software, and utilities, can be deducted. If you work from home, you may also be eligible to claim a portion of your home expenses, including rent, mortgage interest, property taxes, utilities, and home insurance. For example, if your workspace occupies 30% of your rented home, you can write off 30% of your monthly rent as a tax deduction.
• Repairs and maintenance. Any expenses incurred for repairing and maintaining business property or equipment (or the portion of your home you operate your business in) can be deducted. This includes costs for minor repairs, upkeep of office spaces, and maintenance of business vehicles.
• Legal and accounting fees. Fees paid to lawyers, accountants, and other professionals for business-related services are fully deductible. This includes the costs associated with preparing your tax return or seeking legal advice for your business.
• Insurance. Premiums paid for business-related insurance policies, such as liability insurance, business property insurance, or business vehicle insurance, can be deducted.
• Advertising and promotion. Costs related to promoting your business, such as online advertising, print ads, business cards, and trade show expenses, are deductible.
• Travel expenses. If you travel for business, you can deduct the cost of transportation, accommodations, and 50% of your meals. However, it's important to keep detailed records, as personal travel expenses are not deductible.
• Vehicle expenses. If you use a vehicle for business purposes, you can deduct a portion of your vehicle-related expenses, including fuel, insurance, repairs, and leasing costs. The percentage of vehicle use for business must be documented and can be claimed accordingly.

These categories cover the most common deductible expenses for self-employed individuals. Reviewing your specific situation with a TurboTax expert can help ensure that you're maximizing your deductions and staying compliant with Canadian tax laws.

Claiming a computer as a tax deduction in Canada

You can claim your computer as a tax deduction if it's used for business purposes. However, it's important to understand the difference between current and capital expenses. A computer is typically considered a capital expense, meaning it can be depreciated over time rather than deducted in full in the year of purchase.

For example, if you purchase a computer for $3,000, you can't deduct the entire amount in the year you bought it. Instead, you would claim a portion of that expense each year over the computer's use, as determined by the capital cost allowance (CCA) rates set by the CRA.

This gradual deduction process helps spread the cost of the computer over several years, aligning the expense with the period during which the computer is used to generate business income. By doing so, you can still reduce your taxable income each year while accurately reflecting the computer's depreciation.

The Accelerated Investment Incentive allows business owners to write off a larger portion of their depreciable property in the first year of purchase. This can help you recover the cost of your capital expenses sooner by reducing taxes further. Check with a TurboTax expert to see if your business qualifies for this option.

Keeping accurate records of income and expenses

Accurate record keeping is critical for maximizing deductions and ensuring you're prepared in case of an audit. Make sure to separate business and personal expenses, retain all receipts, and use tools like mileage logs for vehicle-related deductions. There are many free or relatively inexpensive apps that will track mileage for you. Search "mileage tracker" in your smartphone app store.

The CRA requires that records are kept for 6 years from the end of the tax year. For instance, after filing your 2025 taxes, you'll need to hang on to those records until the end of 2031. Keeping detailed records not only substantiates your claims to the CRA but also helps you track your financial performance throughout the year, making it easier to identify additional opportunities for tax savings. Proper documentation is also your best defence in the event of an audit and can prevent costly penalties and interest charges.

Tax planning strategies for self-employed individuals in Canada

To maintain a strong financial position and reduce tax-related stress, it's essential to implement a few key strategies throughout the year.

• Set aside 25% of your gross income for taxes. This practice ensures that you have enough funds to cover your tax obligations, helping you avoid the shock of a large payment when tax season arrives.

• Adjust your tax strategy for life events. Changes to personal circumstances, such as marriage, the birth of a child, or purchasing a home can significantly impact your tax situation and may open up new deductions or credits.

• Align tax payments to what you make. If your income varies throughout the year, consider adjusting your quarterly tax payments to align with your earnings, which can help you avoid underpayment penalties.

• Stay on top of general economic fluctuations. Changes in interest rates or new government tax policies can affect your returns. Being informed helps mitigate any negative effects on your tax liability and maintain financial stability.

Developing a year-round tax strategy is essential for self-employed individuals in Canada. By maximizing deductions, utilizing available credits, contributing to retirement savings, and understanding tax law changes, you can reduce your tax burden and gain financial clarity.

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