{"id":7864,"date":"2021-08-20T13:02:11","date_gmt":"2021-08-20T13:02:11","guid":{"rendered":"https:\/\/ownrblog-preprod.go-vip.net\/?p=7266"},"modified":"2023-12-07T13:38:22","modified_gmt":"2023-12-07T13:38:22","slug":"tracking-and-claiming-tax-deductible-business-expenses-in-canada","status":"publish","type":"post","link":"https:\/\/www.ownr.co\/blog\/tracking-and-claiming-tax-deductible-business-expenses-in-canada\/","title":{"rendered":"Tracking and Claiming Tax Deductible Business Expenses in Canada"},"content":{"rendered":" \r\n

Every small business has a smattering of expenses to account for and budget for<\/span><\/a>. Rent, utility bills, and office supplies are common and, when totalled together, aren\u2019t insignificant.<\/p>\r\n \r\n\r\n \r\n

For example, in 2019, real estate agents spent 1.3 per cent of their total revenue on rent and another 1.3 per cent on utility bills. These percentages may appear small, but when every dollar counts, it\u2019s important to keep as much of your revenue as possible. As you scale, those small percentages come to represent not-so-small dollar amounts.<\/p>\r\n \r\n\r\n \r\n

Fortunately, many small business expenses may be claimed and written off<\/span><\/a> as tax deductions. The Canada Revenue Agency (CRA) allows businesses to deduct business expenses<\/span><\/a> when they incur to earn income.\u00a0\u00a0<\/p>\r\n \r\n\r\n \r\n

But before you reduce your tax obligation, it\u2019s important to understand what qualifies as a deductible business expense<\/span><\/a> and how to record and claim business expenses in Canada.<\/p>\r\n \r\n\r\n \r\n

How to determine if a business expense is tax deductible<\/h2>\r\n \r\n\r\n \r\n

In Canada, business expenses are only tax deductible when the expense is reasonable<\/a> <\/span>for your line of work. Reasonable business expenses vary from business to business, as what\u2019s reasonable in one industry differs from that of another.<\/p>\r\n \r\n\r\n \r\n

Generally, business expenses are deemed reasonable if they\u2019re appropriate to your business in both type and cost. For example, you may deduct the cost of your telephone, like your Telus bill<\/span><\/a>, if the expense was incurred for business purposes.<\/p>\r\n \r\n\r\n \r\n

In contrast, the owner of an antique store likely could not write off the purchase of a brand-new motorcycle.<\/p>\r\n \r\n\r\n \r\n

Determining if an expense is reasonable is relatively straightforward. If it\u2019s an expense intended entirely for business purposes, such as the office electricity bill, it would be deemed a business expense. However, what happens if you use a single cell phone for both business and personal use?<\/p>\r\n \r\n\r\n \r\n

In a case like this, you could only claim a fraction of the expense\u2014the portion of expenses incurred for business purposes. If you use your phone for business 20 per cent of the time, 20 per cent of your phone bill would be tax deductible. The same applies to the purchase of the hardware. When possible, it\u2019s advisable you put your utility accounts in the company’s name, rather than your own. Check with your accounting professional before making these kinds of capital expenditures.\u00a0<\/p>\r\n \r\n\r\n \r\n

Keeping track of your business expenses<\/h2>\r\n \r\n\r\n \r\n

The CRA expects entrepreneurs and small businesses to document and track business expenses. Any business expense that you intend to claim<\/span><\/a> as a tax deduction must be supported by documentation, including:<\/p>\r\n \r\n\r\n\r\n