The new economy brings with it new tax filing considerations that weren’t even on most tax filers’ radar a few years back. With just over a week to go until the 2017 tax filing deadline, let’s review some of the tax rules concerning the gig economy, as well how to deal with cryptocurrency transactions.
Did you drive for Uber or Lyft in 2017?
If you drove for a ridesharing service in 2017, you need to report any income you earned from that activity as self-employment income on your return. The good news is that, as a self-employed taxpayer (or their spouse or partner), you actually have until June 15, 2018 to file your return; however, any taxes owing for 2017 must still be paid by April 30, 2018 to avoid non-deductible arrears interest, charged at the current prescribed rate of 6 per cent.
Of course, you can deduct appropriate, reasonable expenses against your ridesharing income. For example, you can deduct a percentage of your car’s maintenance expenses (gas, oil, windshield washer fluid, tune-ups, etc.), vehicle insurance, tolls or parking costs, cell phone expenses, ridesharing booking fees and any “freebies” you give to riders, such as water or candy.
As of July 1, 2017, new tax rules were introduced for self-employed taxpayers earning income through ridesharing services. Prior to this date, rideshare drivers who grossed under $30,000 annually were considered “small suppliers” by the Canada Revenue Agency (CRA) and were not required to register, charge, collect or remit GST/HST on their self-employment income. As of July 1, 2017, all rideshare drivers must now be registered for GST/HST and all fares are now subject to GST/HST, no matter how much income you earn from ridesharing.
For example, the Uber website explains that GST/HST is already included in every fare riders pay and needs to be remitted to the CRA. In Quebec, Uber collects and remits the GST/QST, but Quebec drivers are still responsible for filing their annual GST/QST returns at the end of the year. Lyft also provides extensive GST/HST guidance on its website and walks new drivers through the registration process.
The benefit of being registered means you can generally claim input tax credits/refunds for the GST/HST or QST you pay on your expenses (the income tax deduction for the expenses listed above is net of any GST/HST or QST you can recover.)
For both income tax and GST/HST purposes, you need to keep detailed logs to track mileage and allocate business and personal expenses. The ride reports from the rideshare platforms are a great way to keep track of kilometers driven in the year.
Need help reporting your self-employment income?
If you drive for Uber, the company has brokered a deal with Intuit’s TurboTax to offer you 20 per cent off the list price of some of their online solutions. They also offer a free, 45-minute tax webinar for Uber drivers.
Do you rent your home out on Airbnb?
Airbnb, along with various other sites, allow you to rent out your home (or a room within it), condo or vacation property to third parties (“guests”) on a nightly basis. The CRA requires you to report any such rental income on your return, even if you just periodically rent out your home for a night or two when you’re out of town.
You may also have an obligation to register for and collect GST/HST on your income. If you’re considered a small supplier such that your annual revenues are under $30,000 annually, you don’t have to register for a GST/HST account; however, it may be worth your while to register voluntarily so that you can take advantage of input tax credits to recover the GST/HST paid on your related expenses. Since October 1, 2017, Revenu Québec has an agreement with Airbnb whereby Airbnb collects the various Québec hotel taxes, but unlike the Uber agreement, it does not cover QST.
In most cases, the occasional Airbnb rental will be considered rental income as opposed to business income. Rental income is reported on Form T776 (Statement of Real Estate Rentals) and that income is considered to be “earned income” for the purpose of generating RRSP contribution room.
In other cases, where you are providing additional services, such as doing the guest’s own laundry and cooking meals for your guests (akin to a bed and breakfast operation), you may be considered to be operating a business, and generating self-employment, business income, as opposed to purely rental income.
In either case, just like with ridesharing, you can deduct related expenses.
For example, if you bought new sheets, pillows, blankets and towels for use by your guests, you can claim those on your tax return. Other eligible expenses include property taxes, insurance, heat, electricity, municipal annual licensing fees, mortgage interest (but not principal payments), tax depreciation, cable and Internet (if provided to your guests), as well as various repairs and maintenance costs.
Keep in mind that only a portion of these expenses are deductible. For example, if you only rent out one room in your home a few times per month, you need to pro-rate your utility bills not only by the percentage of your home you rent out (either by room or square metres) but also by the number nights you rent it out annually. That’s where things can get a bit complicated.
If you need some help calculating and reporting the appropriate income and expenses from your rental activity, you can head over to H&R Block, which has partnered with Airbnb to offer a 20 per cent discount for Airbnb hosts on in-person tax preparation services, as well as on their various online products. They’ve also prepared a simple guide for Airbnb hosts, available online.
Did you sell Bitcoin in 2017?
Cryptocurrencies were all the rage in 2017 but if you sold one of the nearly 1,600 digital currencies currently available, you’ll need to account for that sale on your return.
Virtual currencies, such as Bitcoin, Ripple, etc. are not considered to be a currency issued by a government of a country, such as U.S. dollars, and as a result, the CRA treats them as a commodity for tax purposes. Any gains (losses) on the sale of a commodity are reportable on your return.
In most cases, the conversion of, say, Bitcoin back into Canadian dollars or some other currency will result in a capital gain or loss. That gain (loss) is calculated by subtracting the adjusted cost base of the digital currency, calculated using the Bitcoin/Canadian dollar exchange rate on the date of purchase, from the proceeds of disposition, equal to the Canadian dollar equivalent using the Bitcoin/Canadian dollar exchange rate on the date of sale.
Finally, note that the $200 annual tax exemption for foreign currency gains does not apply to digital currency transactions since the CRA doesn’t consider these to be true currencies.
Jamie Golombek, CPA, CA, CFP, CLU, TEP is the Managing Director, Tax & Estate Planning with CIBC Financial Planning & Advice in Toronto.