photo credits: Paychex
So you missed a few expenses? You’re not sure what to expense next year?
Don’t worry, we’ve got you covered.
Starting off as a small business can be challenging, many owners often wonder what constitutes a deductible business expense? The answer the Canada Revenue Agency has provided is simple: a deductible business expense is any reasonable current expense (cost) you paid or will have to pay to earn business income (revenue).
Regularly Audited Personal Expenses
- Non business meals. Unless a meal is for the purpose of earning business income, such as taking a client out for dinner, the cost of the meal is not deductible. This means that going for lunch by yourself is not deductible.
- Non business travel expense. Any trip that is predominantly taken for non-business purposes is disallowed. If a trip is for a business related conference or meeting, the business portion of the trip would include only airfare and accommodations for the duration of the conference or meeting.
- Employee medical expenses. Unless you have set up a private health service plan in your business, health expenses paid for shareholders or employees are not deductible. The good news is that medical expenses are deductible – in the form of a tax credit.
We’ve compiled an inclusive list of the types of expenses (approved by the CRA) that are deductible for business purposes:
- Bad debts
- Business start-up costs
- Business taxes, fees, licenses, dues, memberships, and subscriptions
- Business-use-of-home expenses
- Capital cost allowance
- Current or capital expenses
- Delivery, freight, and express
- Fuel costs
- Legal, accounting, and other professional fees
- Maintenance and repairs
- Management and administration fees
- Meals and entertainment
- Motor vehicle expenses
- Office expenses
- Prepaid expenses
- Property taxes
- Salaries, wages, and benefits
- Telephone and utilities