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One of the primary questions asked by way of a new business owner is "What can one claim as business expenses?"

Beneath the Income Tax Act, there's no true definition of what constitutes an allowable deduction against business or professional income. Essentially, any expense incurred proportional for the operation of the business or in direct relation to earning professional income is an allowable deduction. It might be impossible to list out every deduction allowed in computing business income, because the theory is that, any expense incurred for the purpose of earning salary is deductible. http://businessexpense.info There are particular restrictions and exceptions to the guideline.

In assessing whether expenses are deductible, first apply both simple requirements of a deductible expense:

The expense has to be incurred when it comes to earning income and;
The expense has to be reasonable in the circumstance

There are a few common items which are regularly deductible, including:

Rent for office space
Telephones
Office supplies online
Wages & Benefits
Insurance
Business Memberships
Internet connection
Advertising
Promotional gifts
Business Cards/Letterhead

But how about less than common expenses for example Pet food?

Should you manage a pet store, dog food would be a reasonable expense. http://businessexpense.info Imagine if you own a car repair facility though? Are you able to justify the price? When the dog were on-site 24 hours each day, and free to roam the structure after hours, you can argue that this can be a guard dog for your purposes of protecting your company, therefore, food, vet bills and related expenses might be claimed.

With respect to automobile expenses, contrary to popular belief, you can't claim 100% of your personal vehicle as a business expense. http://businessexpense.info The private use percentage of automobile expenses has to be calculated because they are not deductible. This is generally completed with the assistance of a mileage log. In fact, unless you have a mileage log to aid your claim for automobile expenses, CRA will likely deny your claim. All expenses are then pro-rated between business and use. Typical vehicle related expenses may include:

License and registration fees
Fuel & Oil
Repairs & Maintenance
Insurance
Loan Interest
Lease costs
Depreciation

Most new businesses begin with a property office, therefore, there are numerous of products that you can claim based on the business/personal use portions, of household related expenses; these items generally include:

Utilities
Insurance
Maintenance
Mortgage Interest
Property Taxes

In similar fashion to automobile expenses, you must prorate the expenses based on the amount of space any office occupies (generally using size) vs. the whole house. As an example, if your house is 2,000 sq. ft., as well as the office occupies 100 sq. ft., you'd be eligible to a deduction of 5% with the total household costs; needless to say, this can be subject to 2 conditions:

The space can be used solely for that purposes of earning business income;
The space can be used as the principle workplace in places you generally meet customers.

A relatively recent switch to the Income Tax Act has added an execllent business deduction: Premiums paid for private medical insurance plans are 100% tax deductible, whereas they accustomed to only factor to the medical expense credit. This is a great way of giving yourself you 'benefits' with before tax dollars.

Before deciding on any claims for expenses, it's always best to consult a cpa professional to ensure your claim will stand up to CRA scrutiny. The onus is on you, the taxpayer, to warrant the reasonableness of any deduction.

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