Freelancer Tax Deduction Flow Chart

*This chart is made to give you an idea of what your deductions should be, and  provide a simpler way to think about them in general. If you are unsure about ANY DEDUCTION, please check with a tax professional.


 It’s a Flowchart! (For Freelance Tax Deductions)

One of the most common questions that crops up around the topic of artist/freelancer taxes is: What can I deduct? It’s a tough question because it really varies from business to business. The government sets guidelines, but when it comes to industries like the arts there are a lot of things that are undefined. So it’s up to us, and our wonderful tax professional friends, to figure it out.

I have, in years past, perhaps been a little liberal with what I considered a deduction. This year, as I was reading in more detail about what does and does not qualify, I came up with a few questions that I used to test every expense I was thinking of deducting. Turns out, you can get a good idea of what might qualify as a deduction just by asking yourself a few simple questions.

String them together and hey presto …. a flowchart is born!

In case it seemed odd….

One of the questions that really struck me when I was reading about deductions was “Did you buy it specifically to make money?”. It’s not a question I had ever thought of before when it came to my expenses, but it is in fact the most definite type of deduction. The government assumes that you formed your business in order to make a living (I know, it’s like they don’t even know any artists). So the easiest deductions to clear with them are the costs you incurred to get you to that end goal.. i.e. making money.

In my case, I included things like training costs and business travel under the “to make money” umbrella, as I was spending that money in an effort to make money. Some may argue with me, but hopefully any discrepancies will get caught by the next question: Do you need it for your business?

What I learned:

There are lots of things that I justify to myself as “essential” business expenses, which then become much less so when I imagine trying to explain them to an auditor. So I was challenged to really think about which deductions I was willing (and able) to fight for, and which ones were long shots… or just simply not worth the risk.

What about Food?

One thing I really don’t feel that the “basic deduction” flowchart covers is the complexity surrounding the food costs you can and cannot deduct. Originally, I added a whole food section, but I found it overcomplicated things.

Generally, you’re allowed to write off 50% of ‘business meals’ but it can be a little tricky figuring out what qualifies as such. I still think it’s a good idea to apply the flowchart questions, especially the one about justifying it to an auditor, but until my next flowchart is out… check these expenses with an accountant.

Other Info on Deductions:

If you’re still super confused about how deductions work, never fear!, check out these posts: Canadian Tax Basics, and The Story of Deductions

story of income taxTax Deductions Image

What do you think?

I’m really curious about this one. So please, test it with a few of your deductions! Does it stand up to your real-world situation? Or are there big gaps I should know about? Does it help you think about your deductions more simply, or does it seem overly simple?

I’d love to keep improving it, so send me a note or comment below and I’ll keep working to *hopefully* make this process just a little bit simpler on us all! (Or at least help me send 25 fewer emails to my accountant each year asking about every single possible deduction..)