Self-Employed – Montreal

All expenses related to using a vehicle for business purposes are deductible in proportion to your business mileage versus total mileage. Be reasonable; an excessively high percentage could trigger a tax audit. The best way to justify your vehicle expenses is to maintain a mileage log.
Commuting: Travel between your home and your place of business is considered personal use.
Deductibles: The "business" surcharge on your auto insurance premium and parking fees are fully deductible.

You can deduct expenses related to a space in your home used exclusively as an office or place of business. This includes rent or mortgage interest, municipal and school taxes, home insurance premiums, heating, and electricity.
Calculating the Deduction: The square footage of the office relative to the total area of the home determines the deductible portion.
Maintenance: Certain maintenance expenses that apply only to the office space are fully deductible.
Depreciation (CCA): It is generally not recommended to claim depreciation (Capital Cost Allowance) on a home office, as you may lose the "principal residence" tax-exempt status for that portion of the house when you sell it.
Phone Lines: The basic monthly service fee for your residential landline is not deductible.

Generally, only 50% of meals and entertainment expenses are deductible as business expenses. This includes tickets to shows or sporting events, private boxes, hospitality suites, and related travel.

Golf: Green fees, golf club memberships, and fitness club dues are never deductible. However, food and beverages consumed at these locations remain subject to the 50% rule.

Revenu Québec Limits: In addition to the 50% rule, Revenu Québec applies an annual ceiling based on gross turnover:

Turnover of $32,500 or less: Ceiling of 2%

Turnover between $32,501 and $51,199: Annual ceiling of $650

Turnover of $52,000 or more: Ceiling of 1.25%

Note: This limit does not apply to meal expenses incurred at a location 40 km or more away from your place of business (though they remain 50% deductible).

This expense often surprises new self-employed workers. For Quebec Pension Plan (QPP/RRQ) contributions, you are considered both the employer and the employee. You must pay a total amount equivalent to 9.9% of your net business income (minus a $3,500 base exemption).

Quebec Parental Insurance Plan (QPIP/RQAP): All self-employed workers must contribute to this plan.

Employment Insurance (EI): Self-employed workers can voluntarily opt into EI to receive sickness or compassionate care benefits. You must register one year before making a claim.

Purchasing a computer is a capital expenditure, meaning it is deducted over several years based on its asset class.

Computer equipment rates have varied over the years (ranging from 45% to 100% depending on the purchase date).

Other Assets: Durable goods like office furniture, leasehold improvements, and vehicles are also considered capital assets and are depreciated annually based on their specific lifespan.

If your total taxable sales in Canada exceed $30,000 per year, you must register for GST and QST. Below this threshold, registration is optional.

The Quick Method: For those with few expenses and taxable income under $215,000, the "Quick Method" of accounting simplifies things. You remit a set percentage of taxes collected and do not claim credits (ITCs/ITRs) on most expenses.

Exclusions: Legal, accounting, bookkeeping, actuarial, and tax consultancy services are not eligible for the Quick Method.

Unlike salaried employees, self-employed individuals can deduct the invoice from their tax preparer as a business accounting expense.

To ensure you claim every deduction and tax credit possible, keep rigorous records. Do not wait until the last minute to collect your receipts.

Proof of Purchase: Credit card statements are not sufficient for an audit. You must have original receipts and supporting documents.

Record Retention: Keep all documents for six years after the end of the tax year.

Banking: We strongly recommend opening a separate business bank account to keep your professional and personal finances distinct.

The deadline to file income tax returns for self-employed individuals and their spouses is June 15. However, any balance due must be paid by April 30 (or May 1) to avoid interest charges. We recommend making tax instalments starting in your first year of operation.