The Tax Blog for Smart Canadians

Most side gig income is self-employment income

If you work under a sharing economy app such as Uber, Uber Eats, Skip the Dishes etc., your earnings are considered self-employment income and added to your taxable income. Since this income is not subject to payroll deductions, you will owe the full amount of applicable income tax on your tax return. This might result in balance due.

Get organized and start tracking

Since you now have self-employment income, you must get organized and make sure that your documents are properly archived in order to deduct expenses related to this income. This might seem daunting at first, but just like the innovative technology behind sharing economy apps like Uber and Skip the Dishes, there are accounting apps on the market today that simplify the task of logging your expenses.

For motor vehicle expenses (see below), the CRA requires you to keep a logbook of your business mileage. In the first year of your business, you have to maintain a full logbook to establish a “base year.” Afterwards, you can use a three-month sample logbook for the following years. Again, in this case, technology is your friend. There are apps out there that can track your mileage for you and establish your logbook. Make sure to find the one that’s right for you.

Motor vehicle expenses

As an Uber driver, or a delivery driver under Uber Eats or Skip the Dishes, your main expenses will be related to your motor vehicle. You can deduct expenses such as maintenance, repairs, fuel, depreciation, leasing fees, insurance, license and registration. However, you must prorate these expenses based on the business use of your car. For example, if 30% of your mileage for the year is related to your business, you can deduct 30% of these expenses off your gross business income.

Home office expenses

The types of home office expenses that you can deduct include part of maintenance costs such as heating, home insurance, electricity and cleaning materials. You can also deduct part of your property taxes, mortgage interest and depreciation, or rent if you rent your home. Keep in mind that you can only claim a prorated amount of the expenses mentioned above based on the percentage of your home being used as a home office.

Although you can deduct home office expenses as an employee due to the pandemic, there are restrictions on the types of expenses you can claim. For example, expenses related to home ownership such as property taxes, home insurance and mortgage interest are not eligible for a salaried employee, but they are allowed if you are self-employed.

CERB repayment

If you were already self-employed, you may have applied for pandemic-related benefits such as the Canada Emergency Response Benefit (CERB) due to a substantial loss of income. As a result of the confusion surrounding the eligibility criteria, you could be required to repay some of the benefits received.

Thankfully, the federal government announced that self-employed individuals whose net (after expenses) self-employment income was less than $5,000 and who applied for the CERB will not be required to repay the CERB as long as their gross (before expenses) self-employment income was at least $5,000 and they met all other eligibility criteria. Under the old criteria, individuals were required to have at least $5,000 of net self-employment income in either 2019 or 2020.

Additionally, pursuant to an interest relief measure, individuals who have a balance owing on their 2020 tax return and who have received benefits related to the COVID-19 pandemic in 2020 will not be required to pay interest on that balance until April 30, 2022, as long as their taxable income is $75,000 or less.

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