Business Expenses

A business expense is a cost you incur for the sole purpose of earning business income. Incur means that either you paid or will have to pay the expense. As a general rule, you can deduct any reasonable expense you incur to earn business income. The expenses you can deduct include any GST/HST you incur on these expenses. However, you cannot deduct any personal expenses. In addition, you cannot claim expenses you incur to buy capital property. A deduction is allowed for a portion of the capital cost of the capital property and is called capital cost allowance (CCA).

The general rules for deductibility are that the expenses:

1. be incurred to produce income and be "expected" to earn income related to the taxpayer’s business

2. be reasonable

3. not be of a capital nature; "CCA rules" may apply

4. not be for personal or living expenses; CRA rules relating to "reasonable expectation for profit"

5. not be restricted by statute, example certain club dues

6. not be used to earn exempt income

7. not be a political contribution. A limited tax credit is available for political donations.

8. not exceed a reasonable allowance for automobile expenses paid to an employee unless the allowance is included in the employees income.

9. not be related to certain prepared expenses. Expenses are deductible only in the taxation year to which the expenses relate.

10. not be for interest and other expenses relating to tax sheltered plans (ex. RRSP’s)

11. not relate to workspace in home expenses unless the office is the individuals principal place of business or is used for meeting clients in earning income from business. The home office expense cannot be used to create a loss from the business

You must back up business expense claims with a sales invoice, agreement of purchase and sale, a receipt, or some other voucher that supports the expenditure. Credit card purchases must be supported by statements as well as the credit card receipt. So, if you pay cash for any business expenses, be sure to get receipts or other vouchers. Receipts should include the vendor's name and the date.

Remember to keep your cancelled cheques if you receive them from the bank. This is one part of your proof that the bill was paid or the asset purchased. Keep the cancelled cheques in an orderly manner so CRA can easily review them.

Home Based Business

Personal Or Living Expenses

Prepaid Expenses

Professional Fees

Advertising 

Bad Debts

Delivery Expenses

Business Tax, Fees, and Dues

Insurance

Interest And Bank Charges

Repairs And Maintenance

Meals And Entertainment

Motor Vehicle Expenses

Office Expenses

Small Tools And Supplies

Property Taxes

Rent

Salaries

Travel

Telephone And Utilities

Disability Related Modifications To Buildings

Leasing Costs

Convention Expenses

Capital Cost Allowance

Eligible Capital Expenditures

Foreign Exchange Taxation Rules 

Notice

Business and Canadian Taxation issues can be extremely complex and technical. Most businesses and Canadian taxpayers should consider the services of a professional who is knowledgeable in business and Canadian taxation matters. While every effort is made to ensure the information on this website is accurate, errors and/or omissions may occur. The complexity of Canadian law and the varied circumstances of each business and Canadian taxation situation dictates that the information provided may not be suitable in all circumstances. Professional advice should be obtained before considering any specific action. Contact Keith Anderson CA  at (780) 447-5830 if you have further questions,  concerns, or the need for advice.