Contrary to popular belief, dental hygienists can be independent contractors working for a dentist—they do not have to be employees. It all depends on their contracts with their employer. If your contract says that you are an independent contractor, then you are technically self-employed. As a result, you have to file your business taxes to the Canada Revenue Agency (CRA).
Filing business taxes can seem like a daunting thing to do, especially if you have never done it before. Thankfully, the Canada Revenue Agency has a very long list of what expenses professionals in the medical field can claim against their incomes when they file their taxes each year.
In this article, we’ll cover what expenses of a dental hygienist qualify as being tax-deductible to help you fill out and save on your tax return.
Before You Start: Figure Out Your Income Taxes
Before you start claiming dental expenses on your tax return, you will need to figure out whether you can even incorporate your business expenses on your tax return.
Although individual circumstances may be similar, for tax purposes, there is more than one type of self-employment.
According to the Canada Revenue Agency, dental hygienists that have incorporated their businesses must file separate, corporate tax returns. Hygienists who have not incorporated will have to include both their business and personal expenses on their personal tax returns.
Once you have identified your type of self-employment, you can move forward with claiming dental expenses on your respective tax return.
1. Claim Dental Expenses
Helping maintain the dental hygiene of others requires a lot of equipment; you need to buy dental instruments and equipment to use daily. Dental hygienists also have to wear scrubs, masks, and gloves while providing dental care to patients. These professional dental expenses are an important part of doing business.
You can claim dental expenses like scrubs, equipment, and instruments on your tax return. A portion of the expense will be reimbursed to you by reducing your tax owed; this can save you money in the long run because you will not have as much debt to the government.
When claiming dental expenses, make sure to determine how much of a deduction you can claim in one year. For example, dental expenses like a piece of $50,00 equipment are considered capital because they have continuing value beyond one year. As a result, you cannot claim the entire amount you paid for them typically (this year is different where it can be fully deductible).
2. Professional Development Fees
You can become a better employee without having to pay for the expense of your professional development.
If you or your employer would like to advance your knowledge, you can seek professional advice, attend dental hygiene conferences, and complete certifications without worry. All of the aforementioned investments qualify for deductions, including textbooks and travel expenses.
Beware: the Canada Revenue Agency has strict rules about taxable benefits. Do not try to overuse this benefit. Try to diminish the cost of services and travelling as much as possible. This benefit is also only meant for personal use. You should not try to deduct travel fees or meals for your spouse or children.
3. Contributions To Tax-Free Savings Account
On your personal tax return, every payment you make to your tax-free savings account (TFSA) is a deduction. You can subtract the amount that you have paid to your TFSA over the last tax year. It pays to save!
4. Contributions To A Registered Retirement Savings Plan
Self-employed hygienists usually do not have their salaries paid by a dentist. Therefore, neither are their pensions. Therefore, a dental hygienist is responsible for setting part of their salary aside as “investment income” for your retirement.
Thankfully, contributions to a Registered Retirement Savings Plan (RRSP) are non-taxable income. In other words, you will not have to pay tax on any of the money deducted for your retirement. This is a bonus that helps you save money and prepare for the future.
Dental hygienists should dedicate as much of their income as possible to their RRSPs. But, make sure your investment is legal by checking your contribution limits with the CRA. If your payment exceeds your annual allowance, you will have to pay additional interest to the government.
5. Accounting Services
If you are trying to sort out your taxes, you can hire the services of an accountant without having to worry about paying taxes on it. Self-employed individuals can deduct the costs of an accounting service from their net income. This tax deduction benefits every hygienist who works for themselves rather than a dentist. Not only does it allow you to access quality accounting services, but it can also help you get the service you need to prepare and file your tax return correctly.