Freelancing in Canada gives you freedom—but it also comes with one major headache: taxes. Unlike employees who get taxes deducted at the source, freelancers are responsible for tracking, filing, and paying their own taxes. And if you’re not smart about it, the CRA can eat into a huge chunk of your income. But here’s the good news: there are completely legal ways to reduce your tax bill—you just need to know how to use the system to your advantage.
1. Know Your Business Structure
First things first—how you register your freelance business affects how much tax you pay. Most freelancers start as sole proprietors, which is fine early on. But once you’re consistently earning $60,000+ per year, you might want to consider incorporating. Why? Because corporations are taxed at a much lower rate than individuals. While you pay up to 33% in personal income taxes, the small business tax rate for corporations in Canada is around 9–12% on the first $500,000.
2. Deduct EVERYTHING You’re Allowed To
One of the biggest perks of freelancing? Business write-offs. That means you can deduct expenses like your laptop, internet, phone bill, website hosting, software subscriptions (like Canva or Adobe), travel costs for client meetings, and even a portion of your rent or mortgage if you work from home. Every legitimate deduction lowers your taxable income, and that means less money sent to the CRA.
3. Home Office = Major Tax Win
If you work from home, don’t skip the home office deduction. You can claim a percentage of your rent or mortgage interest, utilities, home insurance, and even property taxes. Just calculate what portion of your home is used for work—usually by square footage. For example, if your office takes up 15% of your home, you can claim 15% of those expenses. It adds up fast and can shave hundreds or even thousands off your tax bill.
4. Open a TFSA and RRSP (and Use Them Strategically)
Freelancers don’t get employer pensions—but you can create your own tax shelters. Contributing to a Tax-Free Savings Account (TFSA) lets you grow your money without paying tax on withdrawals. Better yet, using a Registered Retirement Savings Plan (RRSP) reduces your taxable income now and lets your money grow tax-deferred. If you expect to be in a lower tax bracket in retirement, this is a smart long-term tax strategy.
5. Track EVERYTHING—And Use Accounting Software
Tax savings start with good records. If you’re not tracking income and expenses properly, you’re missing out. Use tools like QuickBooks, FreshBooks, or Wave (free) to track every dollar in and out. Not only does this make tax time easier, but if the CRA ever audits you, you’ll have the documentation ready. Plus, many accounting tools can automatically categorize deductible expenses—saving you time and money.
6. Hire an Accountant—Yes, Even if You’re Small
A good accountant doesn’t just file your taxes—they help you plan ahead, avoid mistakes, and find deductions you didn’t even know existed. Many freelancers wait until they’re “making more” to hire one, but that’s backwards. An accountant often pays for themselves in savings. Look for someone who specializes in freelancers or small businesses—they’ll understand your hustle better than a general tax preparer.