What Business Expenses Are Eligible For Deduction?

It’s safe to say that tax season is officially upon us! With March now underway, Canadians have up until the end of next month to file their income tax returns. For self-employed persons, your return must be filed by June 15, 2019, but if you have a balance owing, you must pay it on or before April 30, 2019.  Now, that may sound like a lot of time. But two months can go by pretty quickly. This is especially true if you haven’t yet gathered all of the necessary information to file your tax return with your tax professional.

It’s important to present an accurate account of your business earnings and expenses over the past year. Don’t forget that, as a business owner, you have the ability to deduct expenses that are directly related to your business. The Canada Revenue Agency (CRA) allows you to claim reasonable business expenses.

What is a “reasonable” business expense?

A reasonable expense is an one that is incurred by your business for the purpose of earning business income. Personal and living expenses do not fall into this category. For example, your company telephone and internet service – both used to conduct business on a daily business – are reasonable business expenses. Personal phone and internet use are not.

Business lunches are also considered reasonable business expenses. However, they don’t necessary apply to all business owners. “What is a reasonable business expense for one business may not be for another,” explains Susan Ward on TheBalanceSMB.com, “It seems sensible for a home designer to be claiming lunches entertaining clients as a business expense, for example, but an odd thing for a plumber.”

Your business expenses need to be supported by documentation.

This is why it’s important to save your receipts. We work with our clients to ensure they are audit ready and also ensure that our clients have a firm understanding about all of the business expenses they are permitted to deduct.

“Business owners can deduct annual license fees, business taxes, membership dues for professional organizations, and fees for trade or commercial associations,” clarifies Elizabeth The on RisePeople.com, “The list of eligible business management expenses also includes mail and delivery costs, online marketing fees (such as domain name registration and web hosting), business card orders, and bank charges for payment processing.”

What else is on the list of business expenses that can be deducted?

Insurance premiums are eligible. Such insurances include general business liability, business property and business interruption insurance. As well, if you have paid for any legal counsel or professional consulting, those fees can also be deducted.  As you may have guessed, you can also claim advertising costs. In Canada, costs for media advertising on television, radio, magazines and newspapers are all reasonable business expenses.

In addition, vehicle expenses, meals, entertainment expenses, travel expenses, operating expenses, home office expenses and capital property expenses can be deducted however, there are some limitations with what percentage is eligible to be deducted for certain types of expenses. And, of course, employee salaries and benefits are eligible expenses as well.

For more information, please don’t hesitate to contact us by calling 1-888-675-3528 or by visiting our Contact page and filling out our form!