As a rule, a proprietor or corporation can deduct for tax purposes any reasonable expenses that were incurred to earn business income. However, this rule has its exemptions and other consideration that make up much of the 2,810 pages of the Income Tax Act. However, here are some generalities to consider when looking for deductions.
Common business expenses include the following:
Advertising – advertising in a newspaper, radio, etc.
Business licenses, dues, memberships and subscriptions – including annual license fees and taxes related to the business.
Insurance – include commercial insurance premiums, insurance related to motor vehicle and your work space in your home. In most cases, life insurance is not deductible, however may be in the instance where the lender requires life insurance as a condition of a loan.
Interest – interest incurred on money borrowed for business purposes.
Professional fees – include accounting or legal fees for professional advice or helping you to maintain records, and consulting fees.
Repairs and maintenance – include the cost of labor and materials for repairs done to property that is used to earn income. The value of own your labor is not deductible for tax purposes.
Meals and entertainment – While there are very specific rules with regards to meals and entertainment expense, in most cases you can claim food, beverages, and entertainment expenses at a rate of 50% for tax purposes of ether the amount incurred or an amounts that is reasonable in the circumstances. However, 100% of these expenses may be considered for accounting purposes.
Motor vehicle expenses – should be supported by a log book indicating date of each business trip, the reason, the destination and number of kilometer traveled. Motor vehicle expenses are deductible only when they are reasonable and supported by receipts. Vehicles owned by the company are treated differently, however the log book continues to be recommended.
Office expenses – include small items of office supplies.
Supplies – include the cost of items used directly to provide services.
Telephone and utilities – include the portion of expenses which are incurred to earn income, any personal portion should to be excluded.
Travel – includes costs incurred for transportation, fares and accommodations.
While this is not an exhaustive list it does provide a foundation to consider what expenses should be considered in your financial reporting.
This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. ©2022 Shajani LLP.
Shajani LLP is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning services.