Summary

Being self-employed has a lot of rewards, including the freedom of being your own boss, job security, and the ability to use some of your expenses to reduce your tax obligations but what expenses can you claim?

The following is only a sample of expenses that can be claimed as business expenses, it is not a full list and they differ depending on each type of business. 

What expenses can you claim?

Advertising

This includes advertising in any Canadian medium including the finder’s fee.

Bad Debts

You can claim an account receivable amount as bad debt in a year if it was determined that it is not collectible, and the account receivable amount was included in the income.

Business Start-up Costs

Initial expenses associated with starting the business can be claimed including interest and fees on money borrowed to start the business.

Business Taxes, Dues, and Licenses

You can claim license fees paid to the city or professional organization. Club memberships such as recreation, or sporting activities are not allowed.

Insurance

You can deduct insurance premiums paid on buildings, machinery, workspace, and liability insurance. Motor vehicle insurance is claimed as motor vehicle expenses.

Interest and Bank Charges

You can claim business bank account charges, interest incurred on money borrowed for business purposes or to acquire property for business purposes. There are limits on the interest claimed on money borrowed to buy a passenger vehicle which will be covered under motor vehicle expenses. You cannot claim interest on money borrowed for personal purposed or pay overdue income taxes.

Fees, Penalties, or Bonuses Paid For a Loan

You can deduct the fee paid to reduce the interest rate on your business loan, on penalty or bonus that a financial institution charges you to pay off a loan before it is due.

Legal, Accounting, and Other Professional Fees

You can deduct the fees incurred for external professional advice or services, including consulting fees. You can deduct accounting and legal fees you incur to get advice and help with keeping your records, preparing and filing income tax and sales tax (GST/HST).

Legal and other fees incurred to buy a capital property such as a building, machinery, or a boat. Instead, you add these fees to the cost of the property.

Maintenance and Repairs

You can claim the cost of labour and materials for minor repairs or maintenance done to business property. Capital repairs will be claimed as capital cost allowance (subject to depreciation), you cannot claim the value of your own labour.

Maintenance and repair costs related to business use of workspace in your home will be claimed under the business use of home expenses.

Meals and Entertainment

The maximum amount you can claim for food, beverages, and entertainment expenses is 50% and these expenses have to be business-related, such as meeting with suppliers and customers. Cost of meals when you travel for work or go to a convention, conference, or similar events can be expensed as a travel expense.

You can claim meal and entertainment expenses for an office party or similar event during which you invite all your employees with a limit of six such events per year.

Entertainment expenses include tickets and entrance fees to an entertainment or sporting event, gratuities, cover charges, and room rentals for events.

Office Expenses

You can deduct the cost of office expenses including small office supplies. Office equipment such as chairs, desks, filing cabinets, and furniture are capital items and will be subject to depreciation (capital cost allowance).

Property Tax

You can deduct property tax paid on property used in your business. Property tax related to business use of workspace in your home will be claimed as business use of home expenses.

Rent

You can deduct rent paid for property used in the business.

Salaries, Wages and Benefits

You can claim and deduct salaries paid to employees. Do not include the owner’s drawing or CPP amounts for self-employed un-incorporated sole proprietors or partners. You can include employer’s share of CPP and EI amounts for employer’s salaries and wages, also you can include WSIB and EHT payments – if applicable.

Supplies

You can deduct the cost of items used in the course of operating a business.

Telephone and Utilities

You can claim expenses paid for telephone and utilities, such as heating, electricity, water, and cable if you incurred these expenses to earn income. Utility expenses related to business use of workspace in your home have to be claimed under the business use of home expenses. Cell phone expenses – you can only claim the portion of cell phone expenses related to business use.

Travel

You can deduct travel expenses incurred in earning business income and professional income. Travel expenses include; public transportation fares, hotel accommodations, transportation, and meals.

Vehicle Expenses

If the motor vehicle is used exclusively for your business, you can deduct all of the expenses related to that vehicle including; gas, insurance, repair costs, parking, and other related expenses. If you use your vehicle for both business and personal, you can deduct a percentage of those expenses based on the amount of business use. A log of a total annual mileage of your vehicle must be kept in a logbook, CRA can ask for this logbook to substantiate those expenses.

Allowed Motor Vehicle Expenses:

  • Licence and registration fees
  • Fuel and oil costs
  • Insurance
  • Interest on money borrowed to buy a motor vehicle – the amount of interest is the lower of the total interest paid during the fiscal period or $3,650
  • Leasing costs – you can deduct a maximum of $800 + HST per month, which works to a maximum of $9,600 in allowable leasing expenses per year
  • Depreciation (Capital Cost Allowance – CCA)

Please note that the above information is intended as a general source of information and should not be considered as specific source of legal or financial advice. Rules and regulation are subject to change at any time, as we at MMS Accounting & Bookkeeping Services will always try to provide you with up to date information. Please call our office at 647.749.8798 or email us at info@mmsaccounting.ca for further information.

rRSP

tFSA

contribution room

rRSP

18% of previous year’s earned income, less any pension adjustment

tFSA

$5,000 / year, subject to inflation adjustment after 2009 as stated by Revenue Canada

carry forward of unused contribution room

rRSP

Unused contribution room carried forward until the year the contributor turns 71

tFSA

Unused contribution room carried forward indefinitely

require earned income to contribute

rRSP

Yes

tFSA

No

age qualifications to make contributions

rRSP

Any age until you reach 71

tFSA

Must be over 18 and no maximum age

are contributions tax Deductible

rRSP

Yes – reduces taxable income

tFSA

No

tax implications on income growth

rRSP

Tax deferred (not taxed until withdrawn)

tFSA

Tax free (never taxed)

tax implications on withdrawals

rRSP

Withdrawals are added to your taxable income in the year funds are withdrawn

tFSA

Withdrawals are tax free

can i withdraw savings for any reason

rRSP

Yes – but depending on kind of investment. Tax will be withheld at time of withdrawal

tFSA

Yes – but depending on kind of investment. No tax will be withheld at time of withdrawal

am i required to change my plan at a certain age

rRSP

Yes – RRSP must be converted to RIF or an annuity by end of the year you turn 71 or you can choose to close the plan

tFSA

No

are there over-contribution penalty tax?

rRSP

Yes – excess contributions are subject to a penalty tax of 1% per month. Penalty tax only applies if you exceed the $2,000 lifetime over-contribution amount

tFSA

Yes – excess contributions are subject to a penalty tax of 1% per month

The following is only a sample of expenses that can be claimed as business expenses, it is not a full list and they differ depending on each type of business. 

What expenses can you claim?

Advertising

This includes advertising in any Canadian medium including the finder’s fee.

Bad Debts

You can claim an account receivable amount as bad debt in a year if it was determined that it is not collectible, and the account receivable amount was included in the income.

Business Start-up Costs

Initial expenses associated with starting the business can be claimed including interest and fees on money borrowed to start the business.

Business Taxes, Dues, and Licenses

You can claim license fees paid to the city or professional organization. Club memberships such as recreation, or sporting activities are not allowed.

Insurance

You can deduct insurance premiums paid on buildings, machinery, workspace, and liability insurance. Motor vehicle insurance is claimed as motor vehicle expenses.

Interest and Bank Charges

You can claim business bank account charges, interest incurred on money borrowed for business purposes or to acquire property for business purposes. There are limits on the interest claimed on money borrowed to buy a passenger vehicle which will be covered under motor vehicle expenses. You cannot claim interest on money borrowed for personal purposed or pay overdue income taxes.

Fees, Penalties, or Bonuses Paid For a Loan

You can deduct the fee paid to reduce the interest rate on your business loan, on penalty or bonus that a financial institution charges you to pay off a loan before it is due.

Legal, Accounting, and Other Professional Fees

You can deduct the fees incurred for external professional advice or services, including consulting fees. You can deduct accounting and legal fees you incur to get advice and help with keeping your records, preparing and filing income tax and sales tax (GST/HST).

Legal and other fees incurred to buy a capital property such as a building, machinery, or a boat. Instead, you add these fees to the cost of the property.

Maintenance and Repairs

You can claim the cost of labour and materials for minor repairs or maintenance done to business property. Capital repairs will be claimed as capital cost allowance (subject to depreciation), you cannot claim the value of your own labour.

Maintenance and repair costs related to business use of workspace in your home will be claimed under the business use of home expenses.

Meals and Entertainment

The maximum amount you can claim for food, beverages, and entertainment expenses is 50% and these expenses have to be business-related, such as meeting with suppliers and customers. Cost of meals when you travel for work or go to a convention, conference, or similar events can be expensed as a travel expense.

You can claim meal and entertainment expenses for an office party or similar event during which you invite all your employees with a limit of six such events per year.

Entertainment expenses include tickets and entrance fees to an entertainment or sporting event, gratuities, cover charges, and room rentals for events.

Office Expenses

You can deduct the cost of office expenses including small office supplies. Office equipment such as chairs, desks, filing cabinets, and furniture are capital items and will be subject to depreciation (capital cost allowance).

Property Tax

You can deduct property tax paid on property used in your business. Property tax related to business use of workspace in your home will be claimed as business use of home expenses.

Rent

You can deduct rent paid for property used in the business.

Salaries, Wages and Benefits

You can claim and deduct salaries paid to employees. Do not include the owner’s drawing or CPP amounts for self-employed un-incorporated sole proprietors or partners. You can include employer’s share of CPP and EI amounts for employer’s salaries and wages, also you can include WSIB and EHT payments – if applicable.

Supplies

You can deduct the cost of items used in the course of operating a business.

Telephone and Utilities

You can claim expenses paid for telephone and utilities, such as heating, electricity, water, and cable if you incurred these expenses to earn income. Utility expenses related to business use of workspace in your home have to be claimed under the business use of home expenses. Cell phone expenses – you can only claim the portion of cell phone expenses related to business use.

Travel

You can deduct travel expenses incurred in earning business income and professional income. Travel expenses include; public transportation fares, hotel accommodations, transportation, and meals.

Vehicle Expenses

If the motor vehicle is used exclusively for your business, you can deduct all of the expenses related to that vehicle including; gas, insurance, repair costs, parking, and other related expenses. If you use your vehicle for both business and personal, you can deduct a percentage of those expenses based on the amount of business use. A log of a total annual mileage of your vehicle must be kept in a logbook, CRA can ask for this logbook to substantiate those expenses.

Allowed Motor Vehicle Expenses:

  • Licence and registration fees
  • Fuel and oil costs
  • Insurance
  • Interest on money borrowed to buy a motor vehicle – the amount of interest is the lower of the total interest paid during the fiscal period or $3,650
  • Leasing costs – you can deduct a maximum of $800 + HST per month, which works to a maximum of $9,600 in allowable leasing expenses per year
  • Depreciation (Capital Cost Allowance – CCA)

Please note that the above information is intended as a general source of information and should not be considered as specific source of legal or financial advice. Rules and regulation are subject to change at any time, as we at MMS Accounting & Bookkeeping Services will always try to provide you with up to date information. Please call our office at 647.749.8798 or email us at info@mmsaccounting.ca for further information.

claims
Expenses
Income Tax
Insurance
Sales Tax
WSIB