A male ride-hailing driver sits in a black SUV, holding his phone and smiling at the camera. His female passenger sits in the backseat, holding her phone and smiling at it.

Grow Your Gig: Tax Planning and Accounting for Gig Economy Workers in B.C.

June 14, 2024

The platform economy, colloquially referred to as the gig economy, encompasses a wide range of workers, from ride-hailing drivers to freelance designers. As the number of individuals participating in this economy grows, so does the complexity of their tax and accounting needs.

In light of the B.C. government’s recent announcement to institute a minimum-wage for ride-hailing and delivery workers, we’ve put together a few tips to help you navigate your tax obligations and optimize your financial planning as a platform economy worker in B.C.

Understand your tax obligations

1. Know your income sources

As a platform economy worker, you must report all income from your gig activities. This includes earnings from Uber, DoorDash, Fiverr, and similar platforms. The CRA generally considers there to be four areas in the platform economy:

  1. Sharing economy: Using/sharing assets like cars and spaces
  2. Gig economy: Short-term contracts, freelance work, etc.
  3. Peer-to-peer: Selling goods like clothing, art, etc.
  4. Social media influencers: Earning income through significant presence or influence on social media platforms

According to the CRA, each area of the platform economy is different and come with their own tax obligations. Keeping detailed records of all earnings and expenses related to your gig work is crucial for accurate reporting and maximizing your deductions.

2. Understand the GST/HST threshold

Generally, if you earn more than $30,000 in a calendar year from your gigs, you must register for a GST/HST number. This includes all income from your platform economy work, including tips, regardless of whether you receive payments directly from clients or through a platform. Once registered, you need to collect GST/HST on your services and remit it to the CRA. If you have any doubt as to whether you should be collecting GST/HST, contact your DMCL advisor who will help you understand your obligations.

Note: This threshold doesn’t apply to commercial ridesharing drivers who must register and collect GST/HST regardless of income earned. Read the CRA’s latest update on income tax obligations for commercial ridesharing and delivery drivers for more information.

3. Track your expenses

Deductible expenses can significantly reduce your taxable income. Common deductible expenses include:

  • Vehicle expenses: Fuel, maintenance, insurance, etc. (see below)
  • Business-use-of-home expenses: Utilities, rent, internet, etc. (see below)
  • Office supplies: Pens, paper, etc.
  • Equipment and supplies: Computers, software, tools, etc.
  • Material expenses: Raw products (e.g. wood, metal)
  • Platform operation expenses: Fees from using a platform to sell services
  • Advertising expenses: Marketing and promotional costs associated with increasing traffic to your website

Maintaining meticulous records of these expenses is crucial. Using accounting software or apps designed for freelancers can simplify this process.

Optimizing deductions

4. Business-use-of-home expense deductions

If you conduct your business from home, you may qualify for the business-use-of-home deduction. This deduction allows you to claim expenses related to the portion of your home used for business purposes. To qualify, the space must be your principal place of business, or you must use it regularly to meet clients, customers, or patients.

Eligible expenses include:

  • Utilities (e.g., heat, electricity, water)
  • Maintenance and minor repairs
  • Rent (if you’re a tenant)
  • Property taxes
  • Mortgage interest (if you own your home)
  • Home insurance

You must calculate the portion of your home expenses that apply to your workspace based on the percentage of your home used for business. For instance, if your home office takes up 10% of your home’s total area, you can claim 10% of your eligible expenses.

5. Vehicle expenses

For gig workers who use their vehicles, such as delivery drivers and ridesharing operators, vehicle expenses can be substantial. You can deduct a portion of your:

  • Gasoline
  • Insurance
  • Maintenance and repairs
  • Depreciation

To maximize your deduction, keep a detailed log of your business mileage and compare it to your total mileage for the year. Mileage tracking apps can make this process much easier, so make sure to take advantage of their capabilities.

Managing cash flow

6. Set aside money for taxes

Unlike traditional employees, gig workers do not have taxes withheld from their income. It’s essential to set aside a portion of your earnings to cover your tax bill. If you’re a resident in Canada, a good rule of thumb is to save about 25-30% of your income for taxes. This applies to all income, including income earned from business done outside Canada.

If you’re not a resident in Canada, you’ll still be subject to income tax on most Canadian-sourced income, unless all/part of that income is exempt under a tax treaty.

7. Budgeting and financial planning

Irregular income is a hallmark of the gig economy, making budgeting and financial planning vital. Establish a budget that accounts for variable income and prioritize an emergency fund to cover periods of low earnings. You DMCL advisor can help you establish a budget for yourself based on trends in your income as a platform economy worker.

Utilize digital tools

8. Tax software and tools

There are several tax software options designed for freelancers and gig workers. These tools can help you track expenses, calculate deductions, and file your taxes. Popular options include QuickBooks, TurboTax, and FreshBooks. DMCL’s cloud accounting advisors are experts in helping their clients get set up with cloud accounting software and best practices for its use. Reach out to your DMCL advisor to get connected and trained on how to use this software to maximize your income as a platform economy worker.

Stay compliant and informed

9. Stay updated on tax laws

Tax laws can change, and staying informed is crucial for compliance and optimization. If you haven’t already, update your DMCL Communications preferences to subscribe to our Between the [Spread]Sheets monthly newsletter and Special Updates and receive timely tax updates directly to your inbox.

10. File on time

Filing your tax return on time is essential to avoid penalties and interest. For most gig workers, the deadline to file your personal income tax return is April 30. However, if you or your spouse/common-law partner are self-employed, the filing deadline is extended to June 15. Despite this extension, any taxes owed are still due by April 30 to avoid interest charges.

Navigating the tax landscape as a platform economy worker in B.C. requires diligent record-keeping, strategic planning, and staying informed about tax regulations. By understanding your obligations, optimizing deductions, managing cash flow, and seeking professional advice, you can ensure your financial health and compliance with tax laws.

For personalized advice and support, consider consulting with your DMCL advisor, who will guide you through the unique ins and outs of tax planning for gig workers and freelancers in the platform economy.