We’ll discuss some basic tax saving tips for freelance translators here.
In general, there are only two ways to increase your profit – to improve your earnings and/or to reduce your expenses including your taxes.
One of the advantages of running a business, whether you are doing it full-time or just freelancing on top of your regular job, is that you can claim many expenses to legitimately reduce your tax bills.
Depending on where you live, there are certain rules and regulations regarding tax deductible expenses. Failure to follow these guidelines may result in severe consequences. It’s extremely important to get yourself well informed and educated on this subject and enjoy the perks of being self-employed.
Here’s a list of tax deductions for translators and you can also consider them as your tax saving tips:
1- Keep a separate office space
To be able to claim your home office expenses, you are required to keep a separate office space from other living area. That is -the designated office space has to be used exclusively for your business purposes.
Based on the size of your home office, you can claim a certain percentage of your rent or mortgage as a tax deductible expense (mortgages are not tax deductible in Canada). Don’t forget that the same percentage of your hydro, gas bills can be claimed as tax deductible costs as well.
It’s not a bad idea to have the exact measurements of your office space on record. It comes in handy if an audit is ever requested.
2- Telephone and internet services
If you don’t have a separate telephone line and internet service for your business, you can determine a percentage of usage by tracking the time and volume these services are designated for your business.
If you have no clue how to calculate this, you may start a journal writing down all the time you spend on the phone and internet for your business in a day, and keep doing it for at least a week. Then you’ll have a pretty solid idea.
As a translator, you heavily rely on your computer to carry out your work. Clearly dividing work from pleasure is one of the most key tax saving tips.
3- Professional improvement
Having a degree or some professional training is a great way to start your career, but that’s not enough. To be able to keep yourself highly competitive, you have to continuously invest in personal and professional development to improve your business.
This includes two major parts – your language skills and your business skills. This is extremely important if you are a freelancer. If you don’t ever spend money on these development, you have no business.
The good news is, professional improvement costs such as business related trainings, courses, books, equipments and professional memberships can all be qualified as business expenses. They are tax deductible.
One of the most commonly used tax saving tips is to make these purchases shortly before you file tax return for the current year. That way, you have a better idea as to how much you want to spend.
Taxes for two different federal income tax brackets can be very different. By spending the right amount of money for your business, you will be qualified for a lower bracket. That saving can be huge.
4- Other costs
Don’t forget claiming other business expenses such as bus passes, gas for your car, mileage, parking, work meals and daycare costs etc.. Again there are certain rules and regulations apply. Make sure you check out these tax saving tips and tax write offs with a professional or visit your tax authority.
5- Keep a very good record of everything
A good record of all business related financial documents not only serves you well for an audit, it also helps you get a better grasp on your business. It helps you track the growth of your business and find out what’s working and what’s not.
It’s also the law.
6- get professional help
If you are like me and don’t want to deal with the tedious aspects of your taxes, get professional help. This is probably one of the most valuable tax saving tips I’ve learned over the years. It not only saves you time, but also reduces your stress and ultimately saves you money, especially if your taxes are complicated.