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Here's What You Can Claim On Your Income Tax

It's important to keep a proper record of your income and expenses and to back it all up with receipts.
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Selling earrings on Etsy? Waiting tables on the weekends? Renting your house on Airbnb? Driving for Uber? All these money-making side hustles are a great idea for adding cash to your pocket, but when do you need to start counting it as taxable income?

We hate to tell you, but tips are taxable and must be reported. Customers in Canada are estimated to leave around $4 billion in tips each year; must feel good to be rolling in cash! The issue is, many of those making daily tips and gratuities may not be telling the Canada Revenue Agency the full story. Even if an employee's income isn't fully recorded on their T4, everything they earn, including tips, must be reported on their income tax return.

The CRA calculates a percentage of your wage as assumed tips so even if you fail to report that amount correctly, or report less than you should, they will still allocate a certain percentage of tips to you. Also, reviews of tip income are conducted frequently by the CRA, so it's best to report your tips accurately.

If you're getting paid under the table, whether in the construction, food and services or retail industries, listen up. The CRA wants to know about all your income, so be sure to work with those who can provide proper tax forms and report all income, even if you received it in cash. Paying people under the table is technically illegal, whether it's your nanny or a contractor you hired to fix your window. Tips earned on the job are part of your overall income.

Your flipped home renovations are tax exempt if your home is currently considered your primary residence. But if this is something you do often and with multiple locations at a time, the capital gains could be up to 100 per cent taxable.

Income earned in a self-employed capacity needs to be reported on Form T2125 Statement of Business or Professional Activities. So, while your profit from those Etsy earrings doesn't land on your T4, you still have to report any income earned to the CRA.

Self-employed taxpayers may claim any reasonable expenses incurred to earn business income, such as deducting service fees or the costs of operating your vehicle while using it for business purposes, cleaning your home after a guest stay or the cost of supplies. It does not include costs not associated with the business, such as your lunches, unless they're with a potential new client.

The moral of the story is: track everything! It's important to keep a proper record of your income and expenses and to back it all up with receipts. Receipts must include a description of the goods or services purchased, so if you are filling up at a gas station, you need more than just the ATM transaction slip or credit card slip. This is the case even if the slip shows the name of the gas station. The tax deductions are in the details.

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