As a small business owner, knowing what you can write off can save you money — and every receipt adds up! More importantly, it can limit your risk for a CRA audit. In this blog, we’ll show you common write-offs to reduce your taxable income, so you can be confident in your spending and not leave any money on the table.
Let’s get our best advice out of the way right now: keep those receipts! Yes, it seems obvious, but you’d be surprised how many people don’t keep track of them. Every small business owner should be keeping receipts to help both you and your accountant.
The general rule of thumb is if the expense was incurred to earn business income, it’s a deductible expense.
Technology and gadgets
If you can justify a business expense for buying a gadget — like a camera or an iPad — the company can pay for it. Other technologies you can deduct are laptops, headphones, cell phones, or even drones. Ask your accountant what gadgets you would like to deduct for business purposes. Just make sure you can support your reasoning to the CRA, if questioned.
Building relationships are central to business success, so if you need to woo or wow your clients, prospects, partners, peers or employees, these expenses are 50% deductible. Treating these folks to something fun is a great way to reward them and give them a reason to show up.
Because there’s a personal benefit and the susceptibility of abuse, only 50% of the cost of these activities is deductible. And not all entertainment expenses are created equal. You can write off sporting events, bar tabs, runway shows, concert and event tickets, taxi rides, lift tickets, even fishing tours. But there are some expenses you cannot write off, like season tickets, recreational facility fees and greens fees.
To learn more about deductible expenses, read our blog, “What business entertainment expenses are deductible?”
Food and drinks
Taking your customers out for the purpose of growing your relationship (and ultimately your business) is both fun and a 50% write-off. To make this deduction, you’ll need to pay for the meal for both yourself and the customer without the expectation of compensation from your client. Write off the full tab — there’s no need to separate tips. As long as it’s for business use, food and booze of any kind can be written off.
Giving back to your employees with a party or a meal out is both rewarding and 100% tax deductible. You can host up to six staff events each year — the only catch is that all staff must be invited. If the meals or drinks are only open to certain employees, the bill is only 50% deductible.
Client and sales events
Hosting a client appreciation night or an open house is a great way to spread the word about your company. The best part is that all food and beverages for the event can be deducted 100%. So show your customers some love, and keep them coming back for more.
Donations and sponsorship
If you get an official tax receipt, we can claim the cost as a donation. If not, then the sponsorship can be treated more like advertising and promotion. This can still be a full deduction as long as the team or nonprofit promotes your company in some way (e.g. product placement, signage, program participation or some other type of promotion). Call us if you have questions or are considering sponsoring a team or other event and want to know if it’s deductible.
Annual general meetings
The jig is up on out-of-town annual general meetings. The CRA doesn’t allow owners and their spouses with no arms-length shareholders to go out of town for an annual general meeting, and qualify the trip as a tax deduction. If you’re looking to host an out-of-town annual general meeting, talk to your accountant about your options.
Keep your receipts if you’re travelling for business or attending an out-of-town conference. You can deduct conference fees, travel, hotels and meals.
Meals are 100% deductible if you’re travelling more than 40 km from your office for business purposes. If you travel a lot for business, it might be a good idea to provide your accountant with details of each trip in an Excel spreadsheet and include dates you travelled, as well as the destination, purpose, and a list of expenses for each trip.
Out-of-town conferences or training
Eyeing an out-of-town conference, event or training seminar? Don’t forget you can deduct the conference fees, travel, hotels and meals for the trip. Be sure to keep all documentation from the conference — we recommend hanging onto the conference receipt and the conference agenda as proof of attendance.
If you’re planning on staying after the conference for a vacation, just give your accountant all the details and they will split the trip expense into personal and business.
Stay up to date on the business expenses the CRA will let you write off.
When in doubt, give us a shout! Our team of reliable Chartered Professional Accounts (CPAs) is ready to help you with write-offs, deductions, GST, expenses, tax filings and more. They have extensive experience, knowledge and an arsenal of skills to help you win this tax season!
Read more about Bookkeeping topics that may be helpful to you and your small business.
Like what you hear?
Are you on the hunt for a more proactive small business accountant? That’s us.