The sharing economy is a kind of shadow economy, where private individuals share products or services, either for free or at a cost. Sharing economy arrangements are typically conducted online, through a community-based website.
The sharing economy is hardly new. For thousands of years people have shared their assets, but the internet has taken it to another level, making it easier than ever for people to sell their assets to willing buyers.
While the sharing economy can be lucrative, you need to be careful, because it will also impact your tax obligations. Below are some small business tax tips that will keep more money in your pocket.
1. Earn income from the sharing economy
There are lots of ways Canadians are taking advantage of the sharing economy, maybe without even knowing it. Renting your cottage, driving for a ride-sharing company, making and selling goods (household, jewellery, beauty products, meals, etc.), and providing other services (animal care, aesthetic services, etc.).
Thanks to the Internet, the sharing economy is also evolving. Other online platforms that have joined the sharing economy include freelance sites that match freelance workers (writers, electricians, handymen, etc.) with customers; fashion platforms that allow individuals to rent or sell their clothes; and co-working platforms that provide shared work spaces for freelancers, entrepreneurs, and those who work from home.
Because of popular peer sharing websites and apps like Uber and Airbnb, the sharing economy is forecasted to grow from $14 billion in 2014 to $335 billion by 2025. And the Canada Revenue Agency wants its share.
2. Tax Obligations
The sharing economy might be an easy way to make money. It’s also easy to receive that money; more often than not, simply transferred into your bank account. Any money you earn through the sharing economy, though, needs to be reported on your annual tax returns.
- This means that it is subject to the same taxes and GST/HST rules that apply to revenue generated from a business or property.
- If you earn more than $30,000 through the sharing economy, you need to register for a GST/HST account.
- If you make money from a ride-sharing platform like Uber or Lyft, you need to register for a GST/HST account, even if you don’t earn more than $30,000 annually.
3. Keep Track of Your Expenses
The sharing economy might be easy to participate in, but it can also be expensive if you don’t keep receipts and track of your expenses. Some of the expenses you incur in the sharing economy as a driver or renter or selling goods and services can be deducted to lower your taxes.
If you’re an Uber drive, you might be able to deduct your gas or items used to keep your vehicle clean. If you’re earning money renting out your home, condo, or cottage on Airbnb, you might be able to claim all the toilet paper you bought or cleaning expenses.
FBC – Helping Self Employed Canadians Prepare Their Taxes
Canada’s tax code is complex at the best of times, but the sharing economy can make doing your annual taxes much more confusing. That’s why it’s important to talk to the small business tax experts at FBC .
We’ll help you minimize the taxes you pay, maximize your returns, and get the most out of your small business.
Why FBC? The tax professionals at FBC have worked exclusively with small business owners, farm operators, self-employed contractors, and entrepreneurs to help them prepare and file their annual taxes since 1952. For more information on FBC and the services we offer, call us today at 1-800-265-1002 or submit an online form and an FBC tax specialist will contact you to book a consultation at your convenience.