Accounting for Plumbers: Is it Time to Incorporate?

So, you’ve jumped into the remote work world. You’ve got your own corporation, you call the shots, and your daily commute is basically a trip from the coffee pot to your desk. It’s the dream, right? But when tax season hits, a lot of incorporated pros get a little tangled up.

You’ve probably heard your self-employed pals talking about “writing off” their home office. It’s a phrase that gets thrown around a lot. But here’s the thing you absolutely need to know as an incorporated professional: you can’t just go and personally deduct a slice of your home expenses on your T1 tax return. That’s not how the game is played for you.

Don’t sweat it, though. There’s actually a much better way. Your corporation can pay you back for those very same expenses, and it’s completely tax-free.

The Shift from Deduction to Reimbursement

First things first, let’s get the idea of a personal “write-off” out of your head. What you should be thinking about is a tax-free reimbursement from your corporation directly to you.

Here’s the deal: your corporation is its own person in the eyes of the law. When you use a part of your home as a dedicated office, you’re essentially leasing that personal space to your business. And your business can—and absolutely should—pay you for it! It’s a totally legit business expense for your company, and it lands in your bank account as tax-free cash. It’s a classic win-win.

So, what kind of costs are we talking about here?

This is way more than just your hydro bill. The reimbursement can cover a percentage of a whole bunch of your home’s running costs. Think about it:

  • Utilities: Your heat, electricity, and water bills.
  • Internet: An absolute must-have for any modern business.
  • Home Insurance: A piece of your policy premium.
  • Property Taxes: Yep, even a portion of these can be included.
  • Rent: If you’re a renter, a percentage of your monthly rent counts.
  • Minor Repairs & Maintenance: Stuff like cleaning supplies or a fresh coat of paint for the office.

This stuff adds up. Fast.

Finding Your “Magic Number”

Alright, so how do you nail down the exact amount your corporation can pay you? You can’t just pull a number out of thin air. You need a reasonable method, and the one the CRA prefers is based on good old square footage.

It’s time to find your magic number.

  1. Measure your dedicated office space. Get out the measuring tape and find the square footage of the room or area you use only for work. For example, a 10×10 room is 100 square feet.
  2. Measure the total square footage of your home. This includes finished basements but you can usually leave out the garage.
  3. Do the simple math. Just divide your office’s square footage by your home’s total square footage. That percentage is your magic number.

Office Square Footage / Total Home Square Footage = Your Reimbursement Percentage

Let’s run a quick example. Say your home office is 150 sq. ft. and your entire home is 1,500 sq. ft. Your magic number is 10%. This means your corporation can reimburse you for exactly 10% of all those household expenses we just listed.

See? It’s that simple. But there’s a catch: this space has to be your principal place of business, or you have to use it regularly and exclusively to meet with clients. That kitchen table you have to clear off every night for dinner? It probably won’t cut it.

Don’t Leave Money on the Table

This isn’t some shady tax loophole. It’s a straightforward, by-the-book way for your corporation to cover the very real costs of doing business from your home. You’re already paying for the electricity, the internet, and the space itself—it’s only fair that your business pulls its weight.

While the math is simple, figuring out precisely which expenses qualify and making sure all your paperwork is squeaky clean for the CRA can feel like a headache. To ensure you’re doing it right and getting the most out of it, it’s always a brilliant move to get in touch with a professional accountant who can walk you through the specifics for your own situation.

Accounting for Plumbers - FAQs

If I incorporate, can I still pay myself easily or does all the money belong to the company?

Yes, you can absolutely pay yourself! While the money technically belongs to the company, you’re the owner, so you call the shots. You can pay yourself a regular salary (which makes you an employee of your own company), pay yourself dividends from the profits, or do a mix of both. Each option has different tax perks, and a good accountant can help you figure out the best strategy for you.

My spouse helps with the books and answering the phone. How does incorporation affect them and our family's finances?

Incorporation can be great for this. It opens up smart ways to do some income splitting. For instance, you could pay your spouse a reasonable salary for the work they actually do, which becomes a handy tax deduction for the business. You could also make them a shareholder, allowing them to receive dividends. The rules here are strict—the pay has to match the work—but it can be a fantastic way to improve your family’s overall tax picture.

Are there specific government grants from CanNor or territorial programs that are only available to incorporated businesses?

Yes, very often. Many of the bigger grants for business development and expansion are specifically designed for formal business structures. While some programs are open to sole proprietors, being incorporated makes you eligible for a much wider range of funding and frankly, makes your application look more solid and professional to the people handing out the money.

What's a realistic all-in cost to set up and maintain a corporation for a small business in the North for the first year?ere

It can vary a bit, but a good budget to have in mind for the first year is somewhere in the $1,500 to $3,500 range. That generally covers the legal and accounting fees to get registered and set up properly, plus the cost for your first corporate tax return. After the first year, the annual costs to keep everything filed and up-to-date are much lower.

I do a lot of work on First Nations' land. Does my business structure impact my ability to get contracts or form partnerships with Indigenous development corporations?

It certainly can. An incorporated business is often seen as more stable, permanent, and professional—a huge plus when you’re bidding for contracts with First Nations governments or looking to partner with their economic development corporations. A formal corporate structure gives you the legal foundation you need for joint ventures and other partnerships, which are incredibly common on major Northern projects.

What can I deduct as a self-employed plumber in BC?

Beyond standard tools and materials, many plumbers miss deductions like protective gear (steel-toed boots, safety glasses), specialized software for scheduling, union dues, and even a portion of your vehicle’s maintenance if it’s used for service calls. We help you track every “hidden” deduction to lower your year-end tax bill. To get a personalized list of deductions for your business, contact our Vancouver office today.

Should I incorporate my plumbing business or stay a sole proprietor?

This is a common question for growing trades. Generally, once your plumbing business is netting more than you need for personal living expenses, incorporating can offer significant tax deferral advantages and limited liability protection. We provide a full cost-benefit analysis to help you decide when to make the switch.

How do I manage GST/PST on plumbing materials and labor?

Navigating sales tax in BC can be tricky for trades. You must charge GST on your labor and materials, but you can also claim Input Tax Credits (ITCs) for the GST you pay on business purchases. We streamline your bookkeeping so your quarterly filings are accurate and painless.