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If you're self employed, now is always a great time to keep track of your receipts and calculating expenses to save Future You from the scrambling to get everything together at tax time.
We understand that the process of doing your taxes beyond filing a simple T4 can feel a little overwhelming, wrapping your head around all that is deductible. Below we’ll break it down so you know what you can claim for your business to help lower your tax bill, and make it easier to estimate, track and file year after year.
Remember, the deadline for filing for self employed residents of Canada is June 17, 2024 for the 2023 tax year.
First things first, accounting fees (like ours) are deductible! You can deduct any expenses related to your accounting, bookkeeping, tax preparation and finances. Legal fees too.
From promotional materials like business cards and brochures, to branded sponsorships of teams, charitable gifts, and events, to full blown advertising campaigns online, in print, and on the air, your advertising expenses for your business are all deductible.
Life happens and sometimes you are unable to collect money owed from a client within a year. Fortunately, the CRA allows you to claim bad debts in many cases. We’d be happy to discuss if you’re not sure.
If you took out a loan to boost your business in some way, such as to buy property or pay other expenses, then you can deduct any bank charges or interest related to that money borrowed. You cannot, however, deduct any money borrowed for personal purposes, nor the principal of your loan or mortgage payments. Again, it’s best to chat with a tax professional for all the details.
Business taxes like gross receipt tax, health and education tax, hospital tax, land transfer tax, and municipal taxes are all tax-deductible, as are annual license fees, such as beverage, driving and trade licences.
Expenses acquired to earn business income are also deductible. This includes dues and fees for trade and commercial associations, including magazine subscriptions.
However, golfers be warned. Hitting the links to connect with clients might feel legit, but the CRA makes it clear by specifically restricting golf club memberships from being tax deductible.
Do you work from home or another designated space? Then you will need to calculate what percentage of your space is used for the purpose of your business and apply that towards your tax deduction.
Business-Use-Of-Home Expenses include maintenance costs, such as cleaning materials, home insurance and utilities, as well as a portion of your property taxes, mortgage interest and capital cost allowance.
If you purchase a capital asset, like a new computer, furniture, or equipment, you must claim the depreciation amount (the Capital Cost Allowance) instead of claiming the full amount. It’s always best to check with a tax professional to ensure you are claiming the appropriate amount as allowed by the CRA.
If you pay for insurance on your building(s), equipment or other machinery for your business, then you can deduct those premiums.
Maintenance is an ongoing part of owning property. If your property is used for earning income, then you can deduct any costs incurred on maintenance and minor repairs, like labour and materials.
Taking clients, employees, and partners out for a good time can be both enjoyable and tax deductible. CRA allows you to deduct 50 percent of your total meal and entertainment expenses for business purposes.
If you use your car regularly for your business, then you can deduct a percentage of your insurance, fuel and oil, license and registration, maintenance and repairs and leasing costs.
To estimate fuel and maintenance costs, you will need to calculate the mileage used for work-related commutes. Keep a travel log as an audit-proof record for the CRA. It doesn’t matter if you use a spreadsheet, app or notebook, as long as you track each time you make a trip to a client’s business (and back) or to any other location where meetings take place.
Your travel log should make note of the date of your trip, your starting point and mileage, your destination and ending mileage, the purpose of your visit, and total km driven.
Who doesn’t love some good stationary! It’s the little things like a quality pen that can bring a burst of joy to your day -- and a pinch of deductions. Stationary items like paper, pencils, pens, etc. qualify as office expenses, whereas desks, chairs and filing cabinets would be claimed as capital items.
Does your business rent a storefront, kitchen, or studio? Any rent you pay for your business space qualifies as a deduction.
As an employer, you can deduct the gross salaries and other benefits paid to your employees. However, you must deduct your part of CPP contributions and employment insurance premiums. If you are incorporated and pay yourself a salary through your corporation, then you can deduct the salaries paid to yourself and any business partners.
Some jobs take us away from home. While that can sometimes be fun, it also incurs an expense. Fortunately, travel for business, including transportation and hotel accommodations, are tax deductible.
Get yourself organized for the year ahead by taking a closer look at what you can claim this year. If you’ve fallen behind by a year or two (or more), not to worry! The sooner you book an appointment, the sooner we can get you back on track before another tax deadline has passed. You’ve got this.
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