As the digital age continues to evolve, content creators on platforms like OnlyFans are finding new ways to monetize their talents. However, with this newfound income comes the responsibility of understanding and managing taxes. For Canadian creators on OnlyFans, navigating the tax landscape can be a bit daunting. This guide aims to shed light on the key areas of taxation that OnlyFans creators in Canada need to be aware of.
Do OnlyFans Creators Have to Pay Taxes?
Absolutely. Regardless of whether you earned $5 or $50,000 on OnlyFans, that income is taxable and must be reported to the Canada Revenue Agency (CRA). The income can come from various sources, including:
- Subscription revenues
- Pay-per-view sales
- Donations & tips
- Merchandise
- Gifts
Is Being an OnlyFans Creator Considered a Business?
Yes, the CRA views OnlyFans creators as business entities. This means all earnings related to OnlyFans should be reported as gross business income. Fortunately, this also means you can claim various deductions to reduce your overall net income for business purposes.
Sole Proprietorship and OnlyFans
Most OnlyFans creators operate as sole proprietors. This is the simplest form of business structure, where you pay personal income tax on the net income generated by your business. Income from OnlyFans is reported on your personal income tax return (T1) under form T2125 “Statement of Business or Professional Activities”.
Completing Form T2125
- Identification: You can use your name as the business name. The NAICS code 519130, which stands for “Internet Publishing and Broadcasting and Web Search Portals”, is suitable for OnlyFans creators.
- Reporting Business Income: OnlyFans pays in US dollars. The amount you receive in your Canadian bank account is converted based on the prevailing exchange rate on the payment date. Sum up all these payments received throughout the year and report it as total business income. It’s advisable to have a separate bank account for OnlyFans payments and use spreadsheets or bookkeeping software to track your income.
Claiming Business Expenses
As an OnlyFans creator, you can deduct expenses incurred to earn income from your business activities. Here are some common deductions:
- Business Use of Home: If you film or work inside your home, you can claim a portion of expenses like property taxes, heat, electricity, insurance, maintenance, and mortgage interest.
- Office Expenses: Deductible items include pens, printer paper, toner, and other office supplies.
- Internet and Cell Phone: Deduct the percentage of your internet and cell phone bill used for your OnlyFans business.
- Professional Fees: Fees for experts like consultants or CPAs are deductible.
- Data Storage & Subscriptions: Costs for external hard drives, cloud storage, and relevant subscriptions like royalty-free music services can be deducted.
- Software: Video editing software used for OnlyFans might be fully deductible or depreciable under Capital Cost Allowance (CCA).
- Costumes, Makeup, and Beauty Products: Items used exclusively for your OnlyFans content are deductible.
Capital Cost Allowance (CCA)
Certain properties like buildings, furniture, or equipment used for your business can’t be fully deducted in the purchase year. Instead, their cost is deducted over several years based on CCA rates set by the CRA. For instance, cameras and video recording equipment fall under Class 8 (20%) if they cost $500 or more, or Class 12 (100%) otherwise.
Sales Tax (GST/HST)
If you earn less than $30,000 gross as a sole proprietor over 4 consecutive calendar quarters, you don’t need to register for GST/HST. However, voluntary registration can have benefits. Since most of your income will likely come from non-resident corporations like OnlyFans (based in the UK), your derived income is considered “zero-rated”. This means you’re effectively collecting sales tax at a 0% rate but can still claim input tax credits (ITCs).
Tax Withholding
OnlyFans doesn’t withhold taxes for Canadian residents. It’s your responsibility to manage your earnings and set aside funds for your tax bill. You will also want to make sure you have completed the W-8BEN form, or equivalent, that is provided by OnlyFans. This form indicates to OnlyFans that you are a Canadian resident and are subject to a 0% tax withholding rate. If this form is not completed, or completed incorrectly, OnlyFans could withhold 25% of your income.
Work With a Tax Accountant
Working with an experienced tax accountant can ensure that you are maximizing your deductions and meeting your tax and filing obligations. Our tax accountants work with a number of content creators across Canada. To learn more about our services, or to book a consultation, please visit our firm’s website.
