Rounding it up
Taxes pay for all sorts of services the Canadian government offers to its citizens.
You’ll have to pay taxes on any revenue you make from streaming, including the value of any products you receive.
Getting a head start on taxes will help you stay ahead.
Here's everything you need to know about streaming and taxes.
Taxes aren’t fun to pay; they get deducted from your paycheque without you doing anything and when you get that pay stub, you can see just how much you’ve “lost” to the Canadian government right there at the top.
You may, then, be looking for a way to make some income that isn’t subject to taxes. In that case, you could keep every single hard-earned dollar and cent right in your bank account. Maybe you think that video game streaming is the answer. After all, why not! You’re just playing video games and people are watching, so what’s the big deal? The government would like a word, my friend, because you do indeed need to pay taxes on the revenue you make streaming your video games. Read on to learn more.
Taxes - what they do and why
You might not like to watch your money go right into the pockets of the Canadian Revenue Agency (CRA) but it goes to a number of different things that actually benefit you. Canada’s income tax supports a whole host of different programs, services, and support networks for the nation’s more than 38 million citizens. This includes road construction, water purification, schooling, healthcare, retiree benefits, prisons, first responders, and more. Paying your taxes is, to put it plainly, the cost of living in a society that has these services.
The CRA understands, however, that you might have some expenses that really shouldn’t be taxed, like the cost of running a business. These things are included as deductions in part of your tax filing each April and lower your taxable income.
But I’m just playing video games…
Yep. It can be hard to get your head around, but the Canadian government doesn’t care all that much about how you earn your money. Any work you do to earn money is considered taxable income. Whether that means you’re working your 9 to 5 in an office downtown, building a home or high-rise building for a paycheque, or, yes, playing video games from your basement; it’s all taxable.
So what do I need to do?
Let’s say you have a regular 9 to 5 job. The company employs you all year and you perform work for them. For this work, you’re compensated. Super! The amount of money you make is calculated and a certain portion of it is withheld. This is the amount of money you see on your pay stub that you’re “losing” each pay period to taxes. If you’ve never seen it, this is the difference between your gross pay (or the amount your employer gives you) and your net pay (the amount you actually take home in your paycheque. The difference is mostly made up of the tax that’s being withheld on your behalf to pay the bill at the end of the year.
At tax time, your company will let the CRA know how much tax they’ve withheld for you. When you file your taxes, the CRA will compare how much your company has withheld for you and the amount of money you’ve made that still need to be taxed. If your company over-withheld, you get a refund. If, however, they didn’t withhold enough, you could end up owing money.
Now, the important part here is that in the above example, there is a company acting with the CRA on your behalf. They’ve held a bunch of money for you to cover your tax bill. If you’re streaming on your own, you haven’t withheld anything, which means you could be in for quite the shock come tax time if you’re not prepared. If you’re streaming and making some decent scratch, make sure you’re saving up some of your cash to cover the coming tax bill.
When it comes to tax time, you’ll have to file a Form T2125 to get your sole proprietorship taxes taken care of. This will include any income you’ve made as a small business (that’s you!) and will help you calculate any deductions you might be able to take for expenses. Tax season can be a stressful time, but if you start early, even if you have to take a day off of streaming that new game, it’s worth it.
What counts as income?
Everything and anything, unfortunately. This includes revenue you generate from ads, subscriptions, and even donations. Donations, in this sense, are considered taxable because they’re to you for a service you’re providing, not to a philanthropy. If you’re a successful gamer, you may also enjoy some nice perks from sponsors, like free headphones, energy drinks, or computer equipment. Unfortunately, the value of those is also taxable.
Is there any way I can pay less?
Just like filing your taxes at a normal job, you’re able to claim certain portions of your income as expenses to offset your taxable income. In the case of a streamer, this may include any money you spent on computer equipment, advertising, subscription services, and more. You also might be able to write off a portion of your home as a workplace or even your internet service. The CRA views streaming as a sole proprietorship, which is important to note so you file correctly.
Another way that you can pay less is by paying less on the front end. When you’re purchasing equipment, make sure you’re using a payment card created with the gamer in mind. KOHO’s Gamer card offers 5% cashback on purchases and a free spending and saving account. Plus, there are no hidden fees, ever. You’ll still have to pay the tax bill but you’ll at least enjoy some cashback in your pocket when you’re making purchases.
But it’s just video games…
I know! It’s tough. But you’re earning money that you will use to support your family, make purchases, and continue your streaming business. It’s important that you pay for your part of existing in society, even if that income only comes from playing the latest triple-A titles or some fun indie retro classics.
Dan is a runner and writer living in the Washington, D.C. area, where he currently works for a financial services trade association as the Communications Director.