Which business expenses can you claim.

Which business expenses can you claim. You have just started a business – but you are not sure what you can claim

The important thing to remember is that expenses must be incurred to earn the business income and they must be reasonable under the circumstances.

Two commonly reviewed expenses by CRA are automobile, and home office. So to help guide you we have prepared some facts about these types of deductible expenses

Automobile

If you have a vehicle owned outright by your business – the cost of the vehicle will be claimable over a period of time at a rate of 30% for depreciation, or capital cost allowance as per CRA terminology.  The total amount of the vehicle to be deducted cannot exceed $30,000 +GST (new higher limits do exist for hybrid or electric vehicles).  If leasing then the lease payments may be deductible but also have a limit of $800 + gst per month, or after Jan 1st 2022 - $900+gst per month.

If the vehicle is used for combined business and personal use then Record the total number of kilometres driven from Jan. 1 to Dec. 31 and calculate the number of kilometres you have driven for business reasons, recording the date, destination and reason for each trip. For example, if you have driven a total of 10,000 kilometres in a year and you have calculated that 1,000 kilometres were for business, you can claim a 10% deduction for the use of your car

It is mandated by the Canada Revenue Agency to retain an accurate logbook containing information about the amount of personal and business use by the vehicle to be verified

Accordingly the other expenses that may be claimed for vehicle are as follows

• Fuel and oil

• Car washes

• Repairs and Maintenance

• Parking

• Vehicle Registration

Another option exists – in lieu of claiming all of the above expenses you may claim a mileage rate,  it is set out each year based on the province you live in and may be claimed for business use of a vehicle.  A log will still be required but you do not need to keep receipts for gas, repairs etc. 

• For 2021 the Alberta rate is 59 cents per km for the first 5000 km then 53 cents per km thereafter. 

• For 2022 the rate is 61 and 55 cents accordingly.

Home Office Expenses

For the 2021 and 2022 – employees working from home may be able to claim up to $500 using the temporary flat rate method – however for small business this is not the case

Home office expenses are known to be the most common type of tax deduction for small businesses in Canada to take advantage of. Essentially, owners can claim deductions on specific expenses relating to a home office space. To be eligible for this deduction, a small business owner must be working primarily from a home office.

The portion of the expenses that you are eligible to claim can be based on either the amount of space dedicated to your home office compared to the size of your house or apartment, or by calculating the square footage of the office space divided by the home’s total square footage.  For example, if one room is 100 square feet in a 1000 square foot home, then 1/10 or 10% of the total property is being used for business, thus 10% of all eligible expenses are able to be claimed.

• If you own your home – then mortgage interest may be claimed but not principal.  Also property taxes are eligible.  If it is a condo unit then condo fees will also qualify.

• If you rent then the rental payment s may be used for the % calculation

Other Expenses which may be eligible to be deducted, include:

• Electricity

• Heat

• Water

• Gas

• Home or renter’s insurance

• Cleaning supplies

• Snow removal

• Gardening

• Garbage fees

• Minor repair costs

If you would like to explore this and other expenses you can deduct please contact us at info@resolveaccounting.com