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As fiscal/calendar year Dec. 31, 2015 just ended, most businesses, either single proprietor, partnership or corporation are almost done in their accounting of their business receipts (to keep business records for 6 years for tax purposes) to come up with the following business related expenses. 

  1. Business taxes, related dues, memberships and subscription;
  2. Interest paid for money borrowed to finance your business and related expenses like fee to purchase or improve a business property, application, appraisal, legal fees, and bank charges
  3. Insurance paid for insurance on building, machinery or equipment use in business
  4. Business administration expenses

    Salary of Spouse and Child – to qualify, the following condition must be met – actual payment of salary, pay the same salary as you would pay someone else to do the job, pay that is reasonable for the children age, and the  must be doing work that is necessary for earning business or professional income.

  5. Maintenance and repair cost on property or vehicle used in business to include materials/parts and labor – vehicle related expense also include cost of fuel, motor oil, and lubricants, license and registration fees, insurance, and the cost of vehicle maintenance and repair. If you've borrowed the money to buy a vehicle, you can claim the interest on your loan as a business expense or if you've leased a vehicle, you can claim the leasing

    Please note that if you have a vehicle that you use for both business and pleasure/personal, you can only claim the portion related to business use by keeping an accurate logbook of business travel for the entire year – like date, destination, and purpose of trip and no. of kilometers.  You have to keep the odometer of your vehicle for the year – beginning and end to track the total kilometers driven for the year.  In this way, you can get the total kilometers used for business divided with total kilometers driven for the year and multiply with total vehicle expenses for the year to establish that portion to be claim as business deduction.

    The catch with vehicle deductions is to be sure you distinguish between business and personal use. If you have a vehicle that you use for both business and pleasure, you can only claim the portion of automobile expenses related to business use as a business tax deduction.

  6. Capital Cost Allowance (CCA or depreciation)

    As sole proprietor or member of partnership, you can claim CCA on line 9936 for form T2125.  While Canadians corporations can claim CCA in the appropriate T2 corporate income tax return and calculated exactly the same way as sole proprietors and partners and the same CCA classes and rules apply.

    The cost of buying a new (or used) vehicle deteriorates over time to write off the cost over several years through capital cost allowance.  There are two types of vehicle – motor vehicles and passenger vehicles.  Passenger vehicles have 2 classes – Class 10 or Class 10.1 with both CCA rate of 30.0% and that with cost more than $30,000 belong in Class 10.1 – GST and PST or HST not included when calculating cost of vehicle for which class.

    As CCA limit for vehicle cost, you can only claim $30,000 plus GST and PST (or HST) regardless of what the vehicle actually cost.

    There is a half-way rule that in the year of the vehicle purchase, you can only claim half year (50.0%) of CCA.  That’s why, time your vehicle purchase for the end of your business’s fiscal/calendar year so that you get the 50.0% of CCA for that entire year (though you don’t have the vehicle until near the end) and then claim the full 100.0% CCA of the vehicle next year.

  7. Cost of office business supplies and expenses which are consumed indirectly to provide the goods or services

    For home-based business, there are home business expenses that are eligible for tax deductions related to work space for business provided your home must be your “principal place of business”, use it to meet clients/customers on a regular and ongoing basis.  CRA advises to use “reasonable basis” to calculate appropriate amount of home business expenses – use a formula by taking area of business work space in home and dividing by total area and multiplying home business expenses.

    Home business expenses includes home utility costs, home maintenance cost – home property repairs, cleaning materials or cleaning services, home insurance, property taxes, mortgage interest, capital cost allowance (depreciation).

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