How and what you can claim your business expenses on your taxes as a blogger (Canada)

As a follow-up to my post on how to declare your income and expenses as a blogger, I thought it would be a good idea to comprehensively list out what you could claim as a blogger with notes learned over the years.

I might repeat some items from my previous post, but better safe than sorry.

I would like to point out that although these points are Canada-specific, but there’s no reason you can’t read through this list and apply it to your taxes in the U.S. Just be sure to read the rules specific to your state.

DISCLAIMER: I AM NOT A CERTIFIED TAX ACCOUNTANT

… I only play one for my personal life and on this blog.

When in doubt, consult the Canada Revenue Agency (CRA) or hire an accountant.

I am just a woman who hates paying for stuff she can (and should be able to do) herself.

For my “credentials”, I have had other sole proprietorships in the past starting at the age of 16 when I did all my taxes on paper by hand (during my school lunch breaks, no less), so blogging is not my first stab at declaring taxes for self-employment.

I also do my own taxes for my corporation, and a lot of business expenses you can claim in a sole proprietorship tends to apply to corporations as well.

Incidentally, I have been audited a few times in my life and I have never had a problem each time because I (scan) and keep a rather detailed trail of my calculations in Excel, along with scanned receipts/proof and what numbers I used in my calculations.

INCOME AND/OR EXPENSES IN A CURRENCY OTHER THAN CANADIAN

You should use the average tax year’s conversion rate given by the Bank of Canada for all income that you are paid in USD or expenses that you pay out in USD.

Although if you pay with a Canadian credit card for expenses, you can just take the CAD amount that was charged to your card and use that as the expense. Just be sure to keep or make a note of how much you paid in USD in just in case you need to prove how you came to your conversion.

You can certainly use any other currency conversion rate you choose, but the safest and obviously the clearest one would be what the Bank has published.

As we are most commonly paid in USD, here’s the direct link to the annual USD to CAD conversion page.

I would find the Annual Average for the tax year you are filing for, and save that PDF so that you have proof just in case they come and audit you.

BUSINESS EXPENSES BY CATEGORY WITH MORE DETAILED NOTES

This section looks like this on the T2125 to state your business or professional activities form that every Canadian blogger should be filing each tax year:

Before I begin..

DOCUMENT EVERYTHING YOU DO

Every calculation, every piece of paper, bank statement, whatever.

Document it all and keep it filed separately for each tax year. Trust me, if you get audited, you will want to just go to that folder labelled “TAX YEAR ####”, photocopy it all and mail it in a big package to the CRA (or in my case, upload all the tax documents online).

DO NOT ASSUME YOU KNOW WHAT GOES WHERE

These are general categories meant to cover every type of business, not just service-based ones (which is essentially blogging).

So if you see something like Rent or Fuel, it doesn’t mean what you think it means.

Now that I’ve scared you into being careful, let’s read on.

BLOGGER BUSINESS EXPENSES

ADVERTISING

As it says, you can promote and advertise your blog and here are some allowable blogger expenses:

• Web hosting fees
• Domain fees (e.g. if you buy a domain name, you can claim the expense here)
• Business Cards (very popular at blogger conferences I hear, not that I’ve ever attended one in my life)
• Flyers
• Posters
• Brochures
• Listings in directories
• Newspaper listings or periodicals

Now if you put an advertisement in the newspaper for your blog, you have to adhere by some Canadian-content rules.

You can only deduct that expense 100% if it is in a publication aimed at Canadians with 80% or more of its content being Canadian-related (think: Globe and Mail!)

If it’s a paper directed at the Canadian market, you can deduct only 50%.

If it’s in a paper that has nothing to do with Canada at all, you cannot deduct any of that cost.

MEALS AND ENTERTAINMENT (ALLOWABLE PART ONLY)

You can only claim 50% if you ate the meal yourself.

If you have employees (even if they’re family members like your kids), and you took them out to a meal, you can claim 100% of their portion of the meal that they ate under SALARIES, WAGES AND BENEFITS, but not your own!

If you ate the meal yourself, and paid $20, you can only claim $10.

BAD DEBTS

This is if someone owed you money but you never got paid, and you want to claim the income tax of your income back.

You won’t actually get the $200 you were owed paid by the government instead, but you will avoid having to pay income taxes on the $200, as you invoiced the customer and have to file it as part of your gross income.

Let’s hope you never have to use this section, but just in case, this is how you do it:

You would have to put in here the full amount you were supposed to be paid (e.g. $200) and it would therefore be subtracted from your income tax return, and you wouldn’t have to pay the income taxes on the income that you were expecting to receive.

INSURANCE

Did you take insurance for things you bought specifically for blogging?

Your computer, or perhaps you are a fashion blogger and have a serious designer wardrobe that you would NOT want to go up in smoke because you need it to run your business.

This is where you would file the insurance costs that you have taken out on your blogging-specific items.

What you can’t file under here are apartment or home insurance costs even if you work from home — you need to skip on down and file this as an expense under Business Use-of-Home.

INTEREST

Do you use a credit card or loan to run your business? Well sometimes you have to the pay interest if you don’t clear the balance (for whatever reason, your advertiser didn’t pay you on time, etc).

This is where you would claim the loan or credit card interest for your business, but remember it is only the part of the interest that is BLOGGING RELATED.

You can’t just rack up a bill of $5000 buying whatever you want that has nothing to do with blogging on your personal credit card, and then claim 100% of it as a business write-off.

For instance you charged $5000 on some shopping spree, but only $50 of that was blogging-related:

Out of that total income, only 10% is blogging-specific

$50 / $5000 = 1%

Let’s say your minimum payment is $300 a month:

$300 x 1% = $3

You can only claim $3 of that credit card interest here, as it is related to blogging.

BUSINESS TAX, FEES, LICENCES, DUES, MEMBERSHIPS, AND SUBSCRIPTIONS

I can’t imagine that any blogger network would charge you to be part of their cult network, but just in case you do pay a fee each month, you can write off the membership here.

One allowable and reasonable blogger-related expense would be if you registered your business name and had to pay something to the Government of Canada. In this case, you can certainly put the expense here.

OFFICE EXPENSES

The general rule is that if it is consumable (e.g. it disappears with use), it goes under here.

If the office expense does not disappear (e.g. furniture, a laptop, a printer), it is not an “Office Expense”, it is considered a Capital Expense, and you need to find the Capital Cost Allowance (CCA) class for it and expense the item’s depreciation. See below for more details.

Here are some allowable blogger expenses:

• Stamps
• Package mailings (e.g. if you mail out a prize or your book)
• Envelopes
• Printer Paper
• Pens / Highlighters
• Stationery

SUPPLIES

You shouldn’t have to ever use this section as a blogger. It’s for people who create products to ship out and sell to others.

So if you created really nice photos on a manual camera (not a digital one), and printed them, you could deduct the cost of film or photo paper here because you manufactured the product to be sold using those goods.

You would not put the photo paper or film under OFFICE EXPENSES, because these supplies are directly related to the product itself, and not to the general “running of the business” (printer paper, stamps, pens, etc).

LEGAL, ACCOUNTING, AND OTHER PROFESSIONAL FEES

Straightforward category (finally!)

• Lawyers
• Bookkeepers
• Accountants
• Tax Preparers

MANAGEMENT AND ADMINISTRATION FEES

If you have a separate Paypal or a bank account that you only use for blogging income, you can put all the management and administration fees here.

If you have a personal Paypal or bank account that you also use for blogging income, you CANNOT claim those bank fees here. You are better off opening a separate no-fee bank or Paypal account just for your business instead.

RENT

If you rent an apartment and blog from home, this is not where you put your rent. You need to skip on down to the Business Use-of-Home section to declare that amount.

This section is only if you rented an actual place specifically for blogging, like an office in a building.

MAINTENANCE AND REPAIRS

If you laptop conked out and you use it for blogging, you can write off the expense of the repair / maintenance that is related to blogging.

So let’s say the repair bill came out to $300. You use the laptop 50% of the time for blogging, so you can write off $150 of that repair bill.

This is not a section where you can record any maintenance or repairs on your home such as if your home floods and it also flooded your home office. You need to use the Business Use-of-Home section to declare that amount.

SALARIES, WAGES, AND BENEFITS (INCLUDING EMPLOYER’S CONTRIBUTIONS)

If you have employees for your blogging enterprise, this is where the expenses go, but not if they’re lawyers, accountants or bookkeepers. Use the other category of LEGAL, ACCOUNTING AND PROFESSIONAL FEES for that.

A lot of bloggers employ their kids or significant others as employees, and you can claim their wages here if you paid your kid to lick 500 envelopes to invite bloggers to some event for instance.

If you bought your kid an ice cream cone instead of paying them $10 to lick those envelopes, you need to deduct the cost of that ice cream cone here.

Or let’s say your wife helped you out and you bought her a gift to thank her — put that amount here.

If your employee ate a meal, you can write it off here (it’s a benefit of the job) and get 100% of the money back.

If YOU ate the meal, you have to put it under MEALS AND ENTERTAINMENT, but you only get 50% of the money back.

(Gosh it’s always the bosses that get screwed..!)

PROPERTY TAXES

This is only if you rented a separate, commercial space for your blogging.

This is not a section where you can record any taxes on your home. You need to use the Business Use-of-Home section to declare that amount.

TRAVEL (INCLUDING TRANSPORTATION FEES, ACCOMMODATIONS, AND ALLOWABLE PART OF MEALS)

This is the section I think the CRA finds has the most problems or discrepancies because it’s kind of confusing, and meant mostly for out-of-town travel but can also function for in-town travel depending on the purpose of your trip.

Not everything is considered travel (your personal vacation is not to be placed under here!), so they are very keen to find cheaters in this area especially if it seems rather outrageous.

That said, it is a great category for bloggers, especially ones who do meet-ups or go to blogger conferences, even ones in your own city (you can write off the taxis or public transit cost).

YOU CAN ONLY CLAIM A TOTAL OF TWO (2) CONFERENCES A YEAR!

It also has to be held by a professional organization and be related to blogging.

You can expense the following with a few restrictions:

• Travel (e.g. flight, bus or train tickets)
• Transportation (e.g. public transit or taxis)
• Hotel costs
• Car Rental
• Gas for the rental car

What you CANNOT claim here:

• Motor vehicle cost (your personal car) — this goes under MOTOR VEHICLE EXPENSES
• Meals — this goes under MEALS AND ENTERTAINMENT

 

NOTE ON MEALS RELATED TO CONFERENCES

Even if you take a plane to go to a blogging conference, and buy a meal on the plane for $5, you can only claim 50% ($2.50) of it not 100%.

But let’s say the conference provides everything for you including meals.

How much would you claim as your per diem?

You can only claim $50 a day a a per diem, but the good news is that if they provide doughnuts, cake, coffee or other mini snacks at the convention, it is not considered part of this $50 per diem.

TELEPHONE AND UTILITIES

If you rented a separate commercial space, you can expense water, heat, electricity and your landline telephone here.

If you blog at home you should not expense utilities such as water, heat, electricity or landline telephones here.

You need to file those under the Business Use-of-Home section to declare those amounts. See below.

You should only put the portion of the expense that is specifically related to blogging.

So if you have a cellphone and pay $100 a month, and you use it for blogging 50% of the time, you can only claim 50% of the bill or $50.

Some allowable blogger expenses:

• Cellphone
• Pager (who uses that any more?)
• Fax line
• Internet Service Provider (ISP)

FUEL COSTS (EXCEPT FOR MOTOR VEHICLES)

You really shouldn’t have to use this category as a blogger.

Let’s say you want to charge the fuel that it cost to drive to a blogger meet-up or conference, this should all be claimed  under MOTOR VEHICLE EXPENSES or TRAVEL (if you rented a car).

You DO NOT file that amount here (even though it sounds reasonable).

This section is for paying for fuel to ship out pallets of products to customers and warehouses, hence the “except for motor vehicles” disclaimer, because you are basically just driving yourself from place to place.

DELIVERY, FREIGHT AND EXPENSES

You really shouldn’t have to use this category as a blogger.

Blogging is mostly service-based, as in we “sell” our brains via writing posts and so on, so it is not product-based where you make something in your home and ship it out.

This section is for major shipping expenses, think freighters and huge trucks that send out pallets of products to customers and warehouses.

So let’s say you have a book or a product that you sell, and you buy stamps or pay for postage / courier charges on letters or small packages that contain your book that you ship out to other bloggers to review.

You DO NOT file that amount here (even though it sounds reasonable).

You should file your postage or courier charges under OFFICE EXPENSES.

MOTOR VEHICLE EXPENSES (NOT INCLUDING CCA)

You can deduct part of the expenses used for blogging if you drive your own car to a conference or go to meet-ups.

You need to keep a record of how many kilometers you drove, when and where to earn said blogging income.

The CRA has a pretty clear example on how to do this calculation here.

ALLOWANCE ON ELIGIBLE CAPITAL PROPERTY

As a blogger you should never have to use this.

It’s for goodwill, or other intangible assets.

CAPITAL COST ALLOWANCE (CCA)

This is where you need to put the amount you are allowed to deduct each year.

You need to fill out the CCA chart (see below) and choose the right class for the equipment you are depreciating (e.g. laptop).

OTHER EXPENSES

This is a shady grey area for other expenses but still legitimate.

Some allowable blogger expenses:

• CDs
• DVDs
• Performance clothing (maybe if you’re a fashion blogger..?)
• Theater tickets or books if they are legitimately related to your blogging business
• Promotional gifts (e.g. you have a book and your bought your editor a gift)
• Private health insurance

A NOTE ON PRIVATE HEALTH INSURANCE FOR FREELANCERS

Being in Canada we have universal health insurance that we pay for in our taxes each year (about $500/year).

That said, some freelancers take personal or private health insurance in addition to that, and you can claim part of it here.

If you earn at least 50% of your income via blogging, and you bought this plan for yourself, your spouse / common-law partner or anyone part of your household (children), you can deduct those health plan premiums here, and they would be a better tax deduction here than if you were to file it under your personal income tax return as a medical expense.

To be clear, what you CANNOT deduct under here are the personal costs of your dental or vision care expenses for instance if you did not pay for them under a private health insurance plan. You can only deduct a private health insurance premium here, not the specific medical expenses.

Those have to be filed under your personal income tax returns as medical expenses.

BLOGGER BUSINESS USE-OF-HOME EXPENSES

HEAT

Put the total amount you paid for the entire year. You will need documents to back this up.

ELECTRICITY

Put the total amount you paid for the entire year. You will need documents to back this up.

INSURANCE

Put the total amount you paid for the entire year for your home or apartment insurance. You will need documents to back this up.

MAINTENANCE

Put the total amount you paid for maintenance (e.g. your roof fell in). You will need documents to back this up.

MORTGAGE INTEREST

Put the total amount you paid for the entire year. You will need documents to back this up.

If you pay rent instead of mortgage interest, this is where you put your rent.

PROPERTY TAXES

Put the total amount you paid for the entire year. You will need documents to back this up.

OTHER EXPENSES

This is where your landline / residential telephone cost would go. Your cellphone however, can go under the BUSINESS EXPENSES – TELEPHONE AND UTILITIES above.

NOW DON’T FORGET TO CALCULATE PERSONAL-USE-ONLY AFTERWARDS

Now that you’ve entered the TOTAL amounts of what you have paid, you have to calculate how much of it was personal use and how much was blogging related, and minus it out from the total.

You have to figure out how much of your home office for blogging is part of your home, either by square footage, or a guesstimate of 10% or less.

CAPITAL COST ALLOWANCE (CCA) FOR NON-CONSUMABLE ITEMS

This is probably the most annoying part of the taxes. I loathe the CCA calculation because the classes are rather confusing.

That said, I came up with a short list based on what bloggers typically have and use:

• Cameras and Video Recording Equipment: Class 8 costing $500 or more otherwise it goes under Class 12
• Photocopiers, Printers, Fax Machines, and Telephones: Class 8
• Laptops: Class 52 Class 50
• Furniture: Class 8
• CDs, Discs, Computer Software, Accounting Software (like TurboTax or UFile if you use either to do your taxes): Class 12 — but not for things like Microsoft Windows because it’s an “operating system” and not a computer software
• Microsoft Windows Operating System Computer Software: Class 52 Class 50 (some say iPhones qualify under this rule because you use it to “monitor and handle data” but you can use your own discretion for this to put it under Class 50 or Class 8)

Some Classes are more advantageous than others (e.g. 100% write off!), and my favourite one was Class 52 because it’s a 100% write off for laptops however Josh in the comments has noted (Updated April 29 2014):

You CANNOT claim anything bought in 2012, 2013, and beyond in class 52.

You have to use class 50, which has a crap 55% rate, and half-year rule.

After you figure out what class they’re in, you need to follow that CCA chart and track the depreciation cost of your capital asset each and every year.

The form looks like this:

EQUIPMENT ADDITIONS: What you bought or added this year.

EQUIPMENT DISPOSITIONS: What you sold or trashed this year.

It is pretty easy to follow the chart. Where it gets tricky would be where they tell you to add or subtract certain columns, but just read the words carefully and you will be fine.

After you have calculated the CCA cost, don’t forget to enter it under the BUSINESS EXPENSES above.