You can deduct travel expenses in the following circumstances:
1. If you own ONE rental property and meet ALL of the following conditions:
2. If you own TWO OR MORE rental properties:
You can deduct travel expenses in the following circumstances:
1. If you own ONE rental property and meet ALL of the following conditions:
2. If you own TWO OR MORE rental properties:
You can deduct advertising expenses, including for ads in Canadian newspapers and spots on Canadian television and radio stations. You can also claim any amount you paid for business cards.
You can deduct all the expense if your advertising is directed at a Canadian market and the original editorial content in the issue is 80% or more of the issue's total non-advertising content.
You can deduct 50% of the expense if your advertising in a periodical directed at a Canadian market and the original editorial content in the issue is less than 80% of the issue's total non-advertising content.
You cannot deduct expenses for advertising directed mainly at a Canadian market when you advertise with a foreign broadcaster.
You may buy property that does not physically exist but gives you a lasting economic benefit. Some examples are goodwill, franchises, concessions, and licences for an unlimited period. The CRA calls this kind of property: eligible capital property. The price you pay to buy this type of property is an eligible capital expenditure.
You cannot deduct the full cost of an eligible capital expenditure, since it is a capital cost and provides a lasting economic benefit. However, you can deduct part of its cost each year. The amount you can deduct is called your annual allowance - consult an accountant on figuring this amount out.
Franchises, concessions, and licences with a limited period to be depreciable properties, not eligible capital properties.
We wish we should simplify what an Asset is according to the CRA, but its a much more complicated than you'd think! Always consult an accountant or refer to this CRA webpage about different classes of assets, or as they refer to it, "Classes of depreciable property".
You can deduct an amount for bad debt (money owed to you that you cannot collect) if you had determined that an account receivable is a bad debt in the year AND you had already included the receivable in income.
To be able to deduct a business expense, you had to have carried on a business in the fiscal period in which the expense was incurred. Because of this, you have to be very clear about the date your business started.
It is necessary to establish whether the expenditure preceded the start of the business or whether the business had in fact begun and there were expenses incurred during preliminary steps leading to the start of normal operations. Often in considering the start of a business, you will make some initial expenditures with that purpose of eventually starting one. As a result, the date when the business can be said to have commenced must be known.
In most cases, your business doesn't start the day you get your first client or make your first sale, instead on the day when you (this may sound vague) are significantly involved in attempting to make profits. For example, if you have an online ecommerce store, your business could start on the day that you order inventory used to fulfill potential orders, regardless of when you make your first online sale.
Examples of business start-up costs include the purchase of a computer and a desk if you're starting a business as a writer. Or if you're starting a shop, your first month's rent and signs could be eligible as start-up costs.
You can deduct any annual licence fees and business taxes you incur to run your business.
You can also deduct annual dues or fees to keep your membership in a trade or commercial association.
You cannot deduct club membership dues (including initiation fees) if the main purpose of the club is dining, recreation, or sporting activities.
You can deduct expenses for the business use of your home, as long as you meet one of the following conditions:
You can deduct part of your maintenance costs such as heat, home insurance, electricity, and cleaning materials. You can also deduct part of your property taxes, mortgage interest, and capital cost allowance (CCA).
If you want more information on business-use-of-home expenses, click here.
You might acquire a depreciable property (examples are cars, farm equipment, and business machines - property that loses value as time goes on). You cannot deduct the cost of the property when you calculate your net business or professional income for the year.
However, since these properties wear out or become obsolete over time, you can deduct their cost over a period of several years. This deduction is called capital cost allowance (CCA). Always make sure to consult an accountant or tax professional when trying figuring this amount out.
A current expense is one that generally recurs after a short period. For example, the cost of painting the exterior of a wooden house is a current expense.
A capital expenses generally gives a lasting benefit or advantage. For example, the cost of putting vinyl siding on the exterior walls of a wooden house is a capital expense.
The CRA does a fantastic job of explaining the difference between a capital expense and current expense. Click here for more information.
You can deduct the cost of delivery, freight, and express incurred in the year that relates to your business.
You can deduct the cost of fuel (including gasoline, diesel, and propane), motor oil, and lubricants used in your business. This is strictly for non-motor vehicle related use of fuel. If you're looking to claim fuel costs for your car, select Motor Vehicle Expenses in the category drop-down list.
You may have self-employment income from a business, a profession, commission, farming, or fishing.
Business income includes income from any activity you carry out for profit or with reasonable expectation of profit. A business includes:
Income that you earn from employment is not the same as business income.
For more information about calculating and reporting your self-employment income or loss, click here
You can deduct all ordinary commercial insurance premiums you incur on any buildings, machinery, and equipment you use in your business.
The insurance costs related to your motor vehicle have to be claimed asMotor vehicle expenses.
The insurance costs related to business use of work space in your home have to be claimed as Business-use-of-home expenses.
You can deduct interest incurred on money borrowed for business purposes or to acquire property for business purposes. However, there are limits on:
Usually, you can only deduct interest up to the amount of income from the land that remains after you deduct all other expenses. You cannot use any remaining amounts of interest to create or increase a loss, and you cannot deduct them from other sources of income.
You can deduct the fee you pay to reduce the interest rate on your loan. You can also deduct any penalty or bonus a financial institution charges you to pay off your loan before it is due. Treat the fee, penalty, or bonus as prepaid interest and deduct it over the remaining original term of your loan.
For example, if the term of your loan is five years and in the third year you pay a fee to reduce your interest rate, treat this fee as a prepaid expense and deduct it over the remaining term (in this case 2 years) of the loan. For more information, click here.
You can deduct certain fees you incur when you get a loan to buy or improve your business property. These fees include:
The rule is that you must deduct these fees over a period of five years, regardless of the term of your loan. Deduct 20% in the current year and 20% in each of the next four years. The 20% limit is reduced proportionally for fiscal periods of less than 12 months.
However, if you repay the loan before the end of the five-year period, you can deduct the remaining financing fees then. The number of years for which you can deduct these fees is not related to the term of your loan.
If you incur standby charges, guarantee fees, service fees, or any other similar fees, you may be able to deduct them in full in the year you incur them. To do so, they have to relate only to that year. As always, consult an accountant before making a decision.
You may be able to deduct interest expenses for a property you used for business purposes, even if you have stopped using the property for such purposes because you are no longer in business. Make sure to consult an accountant before making a decision.
You can deduct interest you paid on a loan made against an insurance policy, as long as the insurer did not add the interest you paid to the adjusted cost base of the insurance policy. As always, consult an accountant before making a decision.
You can choose to capitalize interest on money you borrow:
When you choose to capitalize interest, add the interest to the cost of the property or exploration and development costs instead of deducting the interest as an expense.
The interest related to business use of work space in your home has to be claimed as Business-use-of-home expenses.
Deduct the fees you incurred for external professional advice or services, including consulting fees.
You can deduct accounting and legal fees you incur to get advice and help with keeping your records. You can also deduct fees you incur for preparing and filing your income tax and GST/HST returns.
You can deduct accounting or legal fees you paid to have an objection or appeal prepared against an assessment for income tax, Canada Pension Plan or Quebec Pension Plan contributions, or employment insurance premiums. However, the full amount of these deductible fees must first be reduced by any reimbursement of these fees that you have received. As always, consult an accountant before making a decision.
You cannot deduct legal and other fees you incur to buy a capital property. Instead, add these fees to the cost of the property.
You can deduct the cost of labour and materials for any minor repairs or maintenance done to property you use to earn business income.
However, you cannot deduct any of the following
For repairs that are capital in nature, you can claim a capital cost allowance (CCA). As always, consult an accountant before making a decision.
You have to claim the maintenance and repairs related to business use of work space in your home as Business-use-of-home expenses.
You can deduct management and administration fees, including bank charges, incurred to operate your business. Bank charges include those for processing payments. These do not include employee's salaries, wages, and benefits, property taxes, or any rent paid.
The maximum amount you can claim for food, beverages, and entertainment expenses is 50% of which ever value ends up lower in your calculations:
These limits also apply to the cost of your meals when you travel or go to a convention, conference, or similar event. However, special rules can affect your claim for meals in these cases. For more information, click here and here.
These limits do not apply if any of the following apply to your business:
If you're a long haul truck driver, self-employed foot/bicycle courier, or rickshaw driver, click here for specific information and guidelines.
Include tickets and entrance fees to an entertainment or sporting event, gratuities, cover charges, and room rentals such as for hospitality suites. Click here for more information.
If you use a motor vehicle for business and personal use, you can deduct only the part of the expenses that you paid to earn income.
However, you can deduct the full amount of parking fees related to your business activities and supplementary business insurance for your motor vehicle.
The types of expenses you can claim:
You can also claim Capital Cost Allowance (CCA), but this amount is to be entered on Line 9936 - Capital cost allowance.
To support the amount you can deduct, keep a record of the total kilometres you drive and the kilometres you drive to earn income. For an example, click here.
Click here for more information on motor vehicle expenses, and as always, consult an accountant or tax professional if you're unfamiliar with this process.
You can deduct the cost of office expenses. These include small items such as:
Office expenses do not include the below items as they are considered capital items.
A prepaid expense is an expense you pay for ahead of time.
ExampleSuppose your fiscal year-end is December 31, 2015. On June 30, 2015, you prepay the rent on your store for a full year (July 1, 2015, to June 30, 2016). You can only deduct one-half of this rent as an expense in 2015. You deduct the other half as an expense in 2016.
You can deduct property taxes you incurred for property used in your business. For example, you can deduct property taxes for the land and building where your business is situated.
The property tax related to business use of work space in your home has to be claimed as Business-use-of-home expenses.
You can deduct rent incurred for property used in your business. For example, you can deduct rent for the land and building where your business is situated.
The rent expense related to business use of work space in your home has to be claimed as Business-use-of-home expenses.
You can deduct gross salaries and other benefits you pay to employees. The CRA does a great job at explaining the guidelines, rules, and all other pertinent information related to this. Click here to be redirected to the CRA's page on salaries, wages, and benefits.
You can deduct the cost of items the business used indirectly to provide goods or services (for example, drugs and medication used in a veterinary operation, or cleaning supplies used by a plumber).
There are expenses you may have incurred to earn income, that don't fit into any other category of expenses. Always consult an accountant or tax professional to ensure everything is being done properly.
As long as you did not include these expenses on another line, you do not have to list these expenses on the form one-by-one. Just add all ‘other' expenses together and write the total into Line 9270.
Some common expenses included in this category are:
For more information on "Other Expenses", click here.
You can deduct travel expenses you incur to earn business and income. Travel expenses include:
In most cases, the 50% limit applies to the cost of meals, beverages, and entertainment when you travel. For more information, click here .
The 50% limit also applies to the cost of food and beverages served and entertainment enjoyed when you travel on an airplane, train, or bus, when the ticket price does not include such amounts.
There are expenses you may have incurred to earn income, that don't fit into any other category of expenses. Always consult an accountant or tax professional to ensure everything is being done properly.
As long as you did not include these expenses on another line, you do not have to list these expenses on the form one-by-one. Just add all ‘other' expenses together and write the total into Line 9270.
Some common expenses included in this category are:
For more information on "Other Expenses", click here
If you use your cell phone for both personal and business use, you can only claim the portion used as a business expense and in the pursuit of earning sales, income, etc. For example, if you use your cellphone for 10 hours a day, and only 2 hours of it are used for business related activities, you can only claim 20% of it as a business expense.
You, as the employer, are responsible for determining the percentage of business versus personal use and have to be prepared to justify your position if the CRA asks you to do so.
