What Business Expenses Does The CRA Consider as Tax Deductible?

What Business Expenses Does The CRA Consider as Tax Deductible?

Are you worried about paying a hefty sum of money in the form of taxes to the CRA? Do not worry. You can minimize the excess financial burden on you by writing off the taxes. However, it is important to stick to the guidelines issued by the CRA and implement them properly while deducting business expenses to reap the benefits.

To begin with, a taxpayer needs to know what, according to the CRA, constitutes business expenses that are tax deductible. Read on to improve your knowledge about it.

What Expenses are Eligible for Tax Deduction?

There are various kinds of deductible business expenses. A majority of these expenses relate to the sum of money taken to earn business income. However, the CRA imposes some limits on the deduction of capital expenses as well as GST/HST amounts.

By virtue of the capital cost allowance, those who run businesses are entitled to deducting the amount of money involving depreciable assets in the due course of time. The GST/HST expenses can be recovered through input tax credit over time.

According to the CRA, the following expenses can be deducted for your business

  • Business start-up costs
  • Business fees, tax, dues and licenses
  • Use-of-home expenses involving a business
  • Office expenses,
  • Interest charges
  • Insurance

What Advertising Expenses Are Tax Deductible?

The charges pertaining to the posting of advertisements are tax-deductible as per the rules laid down by the CRA. These include expenses related to the business card, finder’s fees and advertisements in the printed publications, such as magazines, in Canada.

With regard to deductions from advertisements at printed publications, it is necessary to bear the following points in mind:

  • If the actual ad content accounts for either 80% or more of the slot of the content that is not related to the advertisements, you are entitled to deduct the full expense.
  • If the slot covered by the ad content is less than 80% of the slot covered by non-advertising content, you are allowed to deduct only 50% of the overall expense.

Business Start-up Costs

The CRA focuses its attention on determining the actual day when the business had started. This is very important as it helps in the calculation of start-up cost. On the other hand, reporting the actual date of a merger is necessary to ensure correct deductions.

For a business acquisition, the date of the merger is central to the calculation of tax deductions.

Business Tax, Licenses, Fees and Dues

As for this category, you can deduct the following:

  • Any kind of business taxes and annual license fees
  • Yearly fees or dues resulting from membership in a commercial or trade association

Use-of-home Expenses

The expenses related to the following items are included in this category:

  • Electricity
  • Insurance
  • Mortgage Interest
  • Property Taxes
  • Heat

Insurance Costs

Deductible commercial insurance considered on this front include the following:

  • Buildings
  • Machinery
  • Equipment

If you have a car, you can report its insurance with the expenses related to a motor vehicle for business purposes.

Office Expenses

According to the CRA, the costs of the following items are deductible:

  • Pens
  • Pencils
  • Paperclips
  • Stationery
  • Printer paper
  • Stamps

Commodities like filing cabinets and furniture are included in capital expenses.

Feel free to contact us for more information on CRA tax audits, problems & representation in North York Ontario.