Your guide to taxes in today’s sharing economy.
Canadians have certain stereotypes known around the world. We love hockey, maple syrup runs through our veins, and we’re known to be extremely polite. That’s why it’s no surprise that many Canadians end up in the sharing economy.
What you may not realize however, is that when you participate in the sharing economy your tax situation is also impacted.
Sharing is in, AND it can pay your bills.
The sharing economy is an economic system that is based on individuals and businesses looking for a product or service and connecting with those that can provide it in exchange for compensation. The difference is that this exchange of services is sourced and completed through the internet (like apps), done privately through the individual rather than an organization – making anyone who participates, self-employed. The sharing economy can take a variety of forms, such as:
• Accommodation sharing: renting out homes, rooms, cottages.
• Transportation: ride-sharing, rentals of bikes, boats.
• Space rentals: gardens, desks, workspaces, laboratories.
• Making and selling goods: household goods, jewelry, beauty products, food, meals.
Tell the taxman about your sharing nature.
If you’re participating in the sharing economy, any income earned needs to be reported to the Canada Revenue Agency (CRA). If you don’t report your earnings or if you underreport, you could be subject to penalties.
In addition, as soon as you earn more than $30,000, you must register with the CRA to start collecting and remitting GST/HST. As someone who is in the sharing economy, it’s your responsibility to ensure that you collect and remit GST/HST or that your app or website is collecting and remitting for you.
The one notable exception to this is if you participate in ride-sharing services. In this case you must register for GST/HST right away, regardless of revenue.
You’re also free to voluntarily register if you make less than the $30K threshold. When in doubt on how much GST/HST to collect or what is taxable you can always check with the CRA.
Who knew sharing could be so expensive?
Don’t forget to keep receipts and track your expenses as they will help you when it comes time to file. Some of the expenses you incurred while making your money as a driver, a renter, or producer of goods can be claimed to offset your taxes.
For example, if you’re using your car to transport others you can expense your gas and other costs of operating your vehicle. If you’re one of the many renting your home and you need to stock up on toilet paper for your guests, you may be able to claim these expenses as well! Most expenses incurred in earning rental income, such as cleaning your home after a guest stay, are also deductible.
Sharing may be an easy way to earn some income, but it may also make figuring out your tax situation more complex. That’s why we’re here! Consulting the right tax professional whether it’s at an H&R Block office near you or using our expert review program will help simplify your tax requirements and help you get the most out of your new business. Reach out anytime as we’re open year-round.