5 Tax-Deductible Business Expenses in Canada: An Easy Guide

by | Jan 1, 2023

Are you a small business owner looking to claim some of your business expenses in Mississauga? Good news! There are plenty of things you can deduct as tax-deductible. And one way to do that is by claiming business expenses on your tax return. However, specific rules and regulations govern what is and isn’t a deductible expense.

So, this article will help you understand how to claim your business expenses in Canada. Also, we’ll walk you through what you can deduct and the tax obligations that come with it. And we will discuss some tax-deductible business expenses in Canada. Moreover, for managing your corporate taxes, you can completely rely on Yogi & Associates.

1. What are Business Expenses?

According to the Canada Revenue Agency, an expense incurred for business activities is a business expense. Business expenses are different from personal expenses. The following are examples of business expenses that are tax-deductible:

  • Advertising and Marketing Expenses
  • Motor Vehicle Expenses
  • Meal and Entertainment Expenses
  • Home Office Expenses
  • Business Start-up costs
  • Business Insurance
  • Business Travel Expenses

“There may be liberty and justice for all, but there are tax breaks only for some.” -Martin A. Sullivan

2. What are the Tax-Deductible Business Expenses in Canada?

You can claim many business expenses from your income when filing your taxes. This can result in lower taxes and a more significant return. Let’s discuss the top five tax-deductible business expenses in Canada.

1. Advertising and Marketing Expenses.
2. Motor Vehicle Expenses.
3. Meal and Entertainment Expenses.
4. Home Office Expenses.
5. Capital Cost Allowance (CCA).

Read another interesting article by Yogi & Associates: Top 3 Tax-Deductible Business Expenses: A Free Guide.

Advertising and Marketing Expenses

Many business owners spend money on advertisement and marketing purposes. Because ads and marketing play a crucial role in growing your business. There are different types of advertising and marketing expenses you can write off. Such as:

  • Print publications, newspapers, etc.
  • Website hosting and development costs.
  • Television commercials.
  • Social media costs. For example, outsourcing to a social media manager.
  • Pens, mugs, t-shirts, and other branded items.
  • Brochures, pamphlets, and newsletters that you might hand-deliver to prospective customers.
  • Samples of your product.
  • The logo design you outsource to a third party

Motor Vehicle Expenses

If you use your car for personal and business purposes, you can only deduct costs directly related to your business. Also, you can deduct motor vehicle expenses by understanding the information given below:

Vehicle Expenses Costs
License & Registration Fee $200
Gas & Oil $2,400
Insurance $1,200
Interest $650
Maintenance & Repairs $400
Total Expenses $4,850

Meal and Entertainment Expenses

The maximum amount for food, drink, and entertainment costs you may deduct is 50% of the amount paid for these expenses.

For example: if you hosted a customer for lunch at a restaurant, the bill may appear as follows:

Entertainment & Meal Expenses Costs
Food & Beverages $40
HST (Ontario) 13% 5.20
Tip 6.00
Total $51,20
Deductible Expense (50% of total) $25.60

Home Office Expenses

You can deduct certain home office costs as an employee. Such as the work space-in-the-home expenses, office supplies, and phone expenses. So, you must use a detailed approach to claim the employment component of the amounts you were paid. Using the detailed method, you can calculate the claims of workspace in-home expenses.

Capital Cost Allowance

You might buy a depreciable asset to use in your commercial or industrial activities. This asset can be a building, furnishings, or equipment. You can write off a part of the cost of these assets over several years because they might become outdated with time. This annual deduction is called capital cost allowance (CCA).

All salaried employees and commission employees can claim home office expenses. The following table shows the claimable and non-claimable home office expenses:

Can be claimed Cannot be claimed

✔️ Electricity

❌ Mortgage interest
✔️ Water

❌ Home internet connection fees

✔️ Maintenance and minor repair costs ❌ Principal mortgage payments
✔️ Home internet access fees

❌ Furniture

✔️ Rent paid for a house or apartment where you live ❌ Capital expenses (e.g. replacing windows, flooring and furnace.)
✔️ Property Taxes (only for commission employees) ❌ Wall Decorations

 

3. How Do You Claim Your Business Expenses?

The following is a list of things that you need to keep in mind when claiming your business expenses:

  • You can only claim a reasonable business expense (any expense directly related to your business activity), e.g., advertising, office supplies, rent, utilities, etc. 
  • Keep track of your vehicle’s mileage you have consumed for business activities.
  • Keep receipts for any additional items that may be deductible. Such as parking fees or tolls paid while conducting business activities.
  • You should keep receipts of all your business expenses. This will help you keep a record of the costs that you spend for the company. 

4. Keep Track of Your Books

Are you worried about managing your books and tax data? Then don’t be. Using the following tricks can you help can organize your tax information:

  • Keep your personal and professional accounts separate.
  • Utilize an online accounting program (e.g. QuickBooks Online)
  • Keep an eye on the degradation of your equipment.
  • Hire a Bookkeeper (Tip! Yogi & Associates does have an expert bookkeeper).

The Bottom Line!

In short, it will not be wrong to say that business expenses are essential for your finances. Thus, keeping records of your tax information is also important. Because doing so will help your business to grow and become more profitable. Moreover, small business tax deductions can add to significant savings at the end of the year. 

Yogi & Associates offers the best services for corporate taxes in Mississauga, Brampton, and surrounding areas. Thus, when entrusting us with your crucial financial data, we can gather your tax information. So, contact Yogi & Associates immediately to know how we may assist with your tax deductions.

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