- Advertising (in Canadian newspapers, On Canadian TV, and / or Canadian Radio
- The entire expense is deductible if your advertising is directed to a Canadian market and the original editorial content is 80 per cent or more of a periodical’s non-advertising content.
- Deduction is capped at 50 per cent if your advertising is directed to a Canadian market and the original editorial content is less than 80 per cent of a periodical’s total non-advertising content
- Bad Debt
- You cannot collect money owed to you in the current year and have already included the receivable in income
- Business start-up cost
- Must have started your business in the fiscal period in which the expense is incurred
- Must have a clear launch date for the business
- Business Tax, Fees, Licenses, and Dues
- Annual license fees are tax deductible
- Annual dues or fees for belonging to professional organizations may be deducted, unless the organization’s main purpose is dining, recreation, or sporting
- The cost of subscriptions to professional publications may be deducted
- Some business taxes are deductible
- Business-use-of-home Expenses
- Business-related purposes may be deducted if workspace in your home is your primary place of business, or such space is only used for business-related purposes and to meet with clients, customers, or patients.
- The total deduction must be proportionate to the amount of space dedicated to your business (e.g., 25 sq. m. office in a 250 sq. m. home = 10 per cent max deduction of qualifying expenses)
- Capital Cost Allowance
- A portion of the cost of depreciable property, such as buildings, furniture, or equipment, may be deducted over time
- Delivery, Freight, and Express
- Deductible
- Fuel (except for vehicle)
- Deductible
- Fuel related to business use in your home must be claimed as a business-use-of-home expense
- Insurance
- Commercial insurance premiums are deductible
- Vehicle-related premiums must be claimed as motor vehicle expenses
- Premiums related to business use in your home must be claimed as business-use-of-home expenses
- A portion of life insurance premiums may only be claimed if the policy was used as collateral for a business-related loan
- Interest and Bank Fees
- Interest incurred on borrowed money is deductible if the loan was acquired for business purposes
- Certain loans have limitations
- Legal, Accounting, and Professional Fees
- Fees incurred for professional advice, services, or consulting are deductible
- Income tax and GST/HST preparation and filing fees are deductible
- Fees incurred to buy capital property are not deductible
- Maintenance and Repairs
- The cost of labour and materials for repairs done to property used for purposes of business income is deductible
- The value of your own labour, cost for repairs of a capital nature, or costs reimbursed by an insurance company are not deductible
- Repairs related to business use of your home must be claimed as a business-use-of-home expense
- Meal and Entertainment
- Fifty per cent of the lesser of either the amount incurred or a reasonable amount may be deducted
- Special rules may apply when traveling
- Office Expenses
- Small items, such as pens, pencils, and paperclips, may be deducted
- Calculators, furniture, and items deemed capital items may not be deducted
- Prepaid Expenses
- May be deducted in the year or years in which you receive the benefit if you are using the accrual method of accounting
- Non-inventory related prepaid expenses may not be deducted if: you are using the cash method of accounting OR it has been two or more years since paying the expense
- Property Taxes
- May be deducted for property-related to your business
- Property taxes related to business use of your home must be claimed as a business-use-of-home expense
- Rent
- May be deducted for rents incurred for business use
- Rent related to business use of your home must be claimed as a business-use-of-home expense
- Salaries, Wages, and Benefits
- Gross salaries and other benefits paid to employees may be deducted, except for salaries or drawings paid to any owners or partners
- Supplies
- The cost of items used indirectly to provide goods or services may be deducted
- Telephone and Utilities
- Phone and utility costs incurred to earn income are deductible
- Utility expenses incurred at your home for business-related purposes must be claimed as business-use-of-home expenses
- Cell phone bills can also be tracked through your business-use-of home expenses when you are paying for the bill personally
- Travel
- The cost of travel expenses incurred for the sake of business or professional-related purposes may be deducted
Before you can claim an expense as a deduction, your business must have a reasonable exception of profit. other words, you may not be able to claim an expense as a deduction if the CRA has reason to suspect your activities may never be profitable.
For example, income earned from a hobby means you might not be eligible to claim expenses as tax deductions since you never intend it to be profitable. However, you should speak to an accountant to see if it would be wise to have your hobby classified as a business, and therefore eligible to claim tax deductions.
Businesses that aren’t yet turning a profit may have to show the CRA when they expect to be profitable. In this case, you may be able to successfully claim a deduction even if your business hasn’t yet earned a profit.
- ‣ Why should you claim business expenses?
Reducing your tax obligations by deducting qualifying business expenses keeps more money in your business bank account—something that’s important at every stage of your business. That extra money could be reinvested into your business to encourage continued growth, used to benefit your community, or to improve the lives of your employees and family.