Business Expenses – Deductible or Not?

One of the most common questions I receive from my clients regarding their business expenses is

Can I deduct this against my business income? Is this a business expense? Is this tax-deductible?

Per the Canada Revenue Agency: In general, you can deduct any reasonable current expense you paid or will have to pay to earn business income. See below for additional details.

Personal Expenses are excluded from this discussion because they are not bonafide business expenses incurred to earn business income. They should not be included in your business expenses.

For example, groceries, haircuts & styling products, family vacations, fitness attire,  & meals for 1 person are not considered business expenses in most cases, unless you are a provider of which (grocery store, hairstylist, vacation hotel).

Determine what is deductible and what is not deductible can be tough, but that is where I can help.

See below for additional information relating to common business expenses.

• Advertising
• Allowance on eligible capital property
• Bad debts
• Business start-up costs
• Business tax, fees, licenses and dues
• Business-use-of-home-expenses
• Capital cost allowance
• Delivery, freight, and express
• Fuel costs (except for motor vehicles)
• Insurance
• Interest 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 work space in your home
• Maintenance and repairs
  • Long-haul truck drivers
  • Extra food and beverages consumed by self-employed
• Management and administration fees
• Meals and entertainment (allowable part only)
• Motor vehicle expenses
• Legal, accounting, and other professional fees
• Prepaid expenses
• Office expenses
• Other expenses
• Property taxes
• Rent
• Salaries, wages, and benefits (including employer’s contributions)
• Supplies
• Telephone and utilities
• Travel

For more information, please refer to the below link:

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/business-expenses.html

If you liked this post and this raised your interest in getting in touch, contact us and learn how I can be your financial quarterback.