We see it all the time.
Small-business owners aren’t always sure what they can — and can’t — claim as business expenses.
Revenue Canada is, however, pretty specific on the list of allowable business expenses. You could try to find a loophole around but you risk getting into a bit of trouble if the feds decide to take a second look at your return.
You don’t want to see that letter in your mailbox, directing you to the big bad word … AUDIT.
Here’s a quick list of what you can claim:
✓ Allowance on eligible capital property
✓ Bad debts
✓ Business start-up costs
✓ Business tax, fees, licences, dues, memberships and subscriptions
✓ Business-use-of-home expenses
✓ Capital cost allowance
✓ Current or capital expenses
✓ Delivery, freight, and express
✓ Fuel costs (except for motor vehicles)
✓ Legal, accounting, and other professional fees
✓ Maintenance and repairs
✓ Management and administration fees
✓ Meals and entertainment
✓ Motor vehicle expenses
✓ Office expenses
✓ Prepaid expenses
✓ Property taxes
✓ Salaries, wages, and benefits (including employer’s contributions)
✓ Telephone and utilities
We’ve gone into detail with many of these items but we want to clear the mud on what many of our clients believe they can claim.
Revenue Canada draws the line
We know you have expenses related to running your business. We wish we could find a way to help you claim all of them.
It just isn’t possible.
Here are a few of the common items people think can be claimed as expenses but really can’t.
You want to look your best when you’re meeting with clients or trying to sell your product or service. Unless you require specific safety gear or need to wear a branded uniform, all your clothes are a personal expense in Revenue Canada’s eyes.
That goes for dry cleaning, laundry, tailoring and repair, too.
Lunch on the go
Grabbing a quick lunch, just for you, in between meetings and sales pitches? Don’t bother keeping the receipt. Your “meals and entertainment” expenses must be directly related to the active conduct of your business.
You should ensure a business discussion, sales pitch or product demonstration is include, and your dinner guest is a client or, at the very least, a potential client.
If you’re on your own, well, you’re on your own for the expense, too.
Hey, it’s my birthday
Now that sounds like party time! Just don’t try to charge the company for your besties to bash with you. You can, however, host six business-related events a year, as long you follow the rules.
Nope, nope, nope … you just can’t take the kids to Disneyland on the company dime and expect the government to let you claim it. Wouldn’t it be great if you could? Travel falls under the same rules as your solo meals. You can claim attendance at an event or service, provided the experience is for the purpose of earning income.
You can deduct a lot of the costs you incur to earn a business income. They must be reasonable in Revenue Canada’s opinion, though.
And many times, you can claim only a portion of the cost.
It can get confusing sometimes, so if you need some help, we’re always around to assist you with your taxes and planning. We specialize in personal taxes and small-business accounting and financial services. Contact one of our tax specialists and we can help you optimize the tax benefits and credits available to self-employed individuals and small businesses.
Fill out our contact form or give us a call at 403-226-8297.