What Expenses Can I Write Off Against My Business Income?
Tax season here, and we at Taxvisors would like to remind everyone that it is our duty (as salaried individuals, self-employed professionals, small businesses or corporations) to properly report and file our income taxes.
As we approach the April 30th deadline, we will be covering various aspects of Canadian taxes, their implications, and any relevant strategies or planning that can be done to effectively manage your taxation impact.
Today, we will be covering expenses that can be written off against income generated from business activities. While this may be straightforward for salaried individuals or corporations, there are many subtleties for self-employed professionals and small businesses where there is overlap between their home and office (if any).
Even before the Covid-19 pandemic and its lockdowns that necessitated Work-From-Home (WFH) routines, a large number of self-employed individuals and small businesses have been working from their homes.
Expenses can be categorized as the following:
- Business Operating Expenses
- Home Offices and Office Expenses
- Capital Property / Assets (subject to Capital Class Allowance or CCA*)
- Miscellaneous Business Expenses
* CCA is a yearly deduction allowed by Revenue Canada (CRA) to charge a portion of an asset over its life. The entire cost of the asset cannot be claimed as a business expense in the year the asset was acquired, since the asset will be used up, wear out or become obsolete after a number of years. For example, if you buy a car for the office, the entire cost of purchase cannot be claimed in the first year. Rather the CCA will be calculated according to the category of asset and a reasonable estimate of its useful life.
Given below is a list of expenses that can be claimed by a business. For in-depth detail on their application in specific cases, you can go through the CRA directives here, or contact one of our tax consultants for more information:
- Business start-up costs
- Business tax, fees, licenses, and dues Advertising
- Allowance on eligible capital property
- Salaries, wages, and benefits (including employer’s contributions)
- Bad debts
- Business-use-of-home expenses
- Capital cost allowance
- Delivery, freight, and express
- Fuel costs (except for motor vehicles)
- Interest and bank charges
- Fees, penalties, or bonuses paid for a loan
- Fees deductible over five years
- Fees deductible in the year incurred
- Interest deductible on property no longer used for business purposes
- Interest on loans made against insurance policies
- Capitalizing interest
- Interest related to workspace in your home
- Legal, accounting, and other professional fees
- Maintenance and repairs
- Management and administration fees
- Meals and entertainment (allowable part only)
- Long-haul truck drivers
- Extra food and beverages consumed by self-employed
- Motor vehicle expenses
- Office expenses
- Other business expenses
- Prepaid expenses
- Property taxes
- Telephone and utilities
If you have any questions about your tax return or how to file your taxes properly, feel free to reach out to us.
At Taxvisors, we have been providing superior services to thousands of satisfied clients in the Mississauga and GTA for over 20 years area. Our expert teams can handle personal and corporate tax, bookkeeping, and accounting services as well as deal with Canada Revenue Agency (CRA) to provide resolution for Tax Reporting, Filing, Reviews, Compliance Checks, and Audits & Appeals.