You can deduct certain expenses you paid to earn self-employment income. The expenses must be both reasonable and justifiable. This list covers some of the more common eligible business expenses.
Common types of expenses for Self Employed Persons:
You can deduct expenses for advertising, including ads in Canadian newspapers and on Canadian television and radio stations. You can also include any amount you paid as a finder's fee. This also includes business cards, pamphlets any other type of advertising or promotional product.
Bad Debts You can deduct an amount for a bad debt if you: • had determined that an account receivable is a bad debt in the year; and • had already included the receivable in income.
Business Taxes, Fees, Licences, Dues, Memberships, and Subscriptions You can deduct any annual licence fees and business taxes you incur to run your business. You can also deduct annual dues or fees to keep your membership in a trade or commercial association.
Business-use-of-home Expenses You can deduct a reasonable part of your maintenance costs such as heating, home insurance, electricity, and cleaning materials. You can also deduct a part of your property taxes and mortgage interest. If you use part of your home for both your business and personal living, calculate how many hours in the day you use the rooms for your business and then notate that on the form.
Convention Expenses You can deduct the cost of going to a maximum of two conventions a year. The conventions have to: • relate to your business or your professional activity; and • be held by a business or professional organization within the geographical area where the organization normally conducts its business.
Delivery, Freight and Express
You can deduct the cost of delivery, freight, and express incurred in the year that relates to your business.
Direct Wage Costs Wages paid to contractors or sub-contractors.
Legal, Accounting, and Other Professional Fees Deduct the fees you incurred for external professional advice or services, including consulting fees. You can deduct accounting and legal fees you incur to get advice and help in keeping your records. You can also deduct fees you incur for preparing and filing your income tax and GST/HST returns.
Maintenance and Repairs You can deduct the cost of labour and materials for any minor repairs or maintenance done to property you use to earn income. However, you cannot deduct the value of your own labour. You cannot deduct costs you incur for repairs that are capital in nature. A capital expense generally gives a lasting benefit or advantage. For example, the cost of putting vinyl siding on the exterior walls of a wooden house is a capital expense. Renovations and expenses that extend the useful life of your property or improve it beyond its original condition are usually capital expenses.
Management and Administration Fees You can deduct management and administration fees incurred to operate your business, including bank charges on business accounts.
Meals and Entertainment
You may deduct reasonable amounts paid or payable for food, beverages, or entertainment, if those amounts are incurred for the purpose of earning income from a business. (If you paid for the meal for 2 or more people for purposes of business.) You can only claim 50% of the ITC on these expenses as well.
Motor Vehicle Expenses The type of expenses you can include: • licence and registration fees; • fuel costs; • insurance; • interest on money borrowed to buy a motor vehicle • maintenance and repairs; and • leasing costs.
You can deduct motor vehicle expenses only when they are reasonable and you have receipts to support them. To get the full benefit of your claim for each vehicle, keep a record of the total kilometers you drive and the kilometers you drive to earn business income.
For each business trip, keep a log listing the following: • Date; • Destination; • Purpose; • Number of kilometers you drive; and • Odometer reading of each vehicle at the start and end of the fiscal period.
If you change motor vehicles during the fiscal period, record the dates of the changes and the odometer reading at the time you buy, sell, or trade the vehicle. If you use more than one motor vehicle for your business, keep a separate record for each vehicle that shows the total and business kilometers you drive, and the cost to run and maintain each vehicle. Calculate each vehicle's expenses separately.
Office Expenses You can deduct the cost of office expenses, such as pens, pencils, paper clips, stationery, stamps. Office expenses do not include items such as computers, filing cabinets, chairs, and desks. Those tend to be assets and are treated slightly differently than expenses.
Property Taxes You can deduct property taxes you incurred for property used in your business. For example, you can deduct property taxes for the land and building where your business is situated based the percentage of space exclusively used for business use. The property tax related to business use of work space in your home has to be claimed as Business-use-of-home expenses.
Salaries, Wages, and Benefits
As the employer, you can deduct your part of the following amounts payable on employees' remuneration: • Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) contributions; • Employment Insurance (EI) premiums; • Provincial parental insurance plan premiums (a new income replacement plan for residents of Quebec - see Revenu Québec for details); and • Workers' Compensation amounts.
Please note the following are treated as direct wage costs): • Salaries and wages such as • Salaries and drawings of the owner(s) of the business since salaries or drawings paid or payable to you or your partners are not deductible.
You can also deduct any premiums you pay for an employee for a sickness, an accident, a disability, or an income insurance plan.
You can deduct the salary you pay to your child, as long as you meet all these conditions: • You pay the salary; • The work completed is necessary for earning business or professional income; and • The salary is reasonable when you consider your child's age, and the amount you pay is what you would pay someone else.
Keep documents to support the salary you pay your child. If you pay your child by cheque, keep the cancelled cheque. If you pay cash, have the child sign a receipt. Instead of cash, you may pay your child with a product from your business. When you do this, claim the value of the product as an expense and add to your gross sales an amount equal to the value of the product. Your child has to include the value of the product in his or her income.
You can also deduct the salary you pay to your spouse or common-law partner. When you pay your spouse or common-law partner a salary, use the same rules that apply to paying your child. Report the salaries you pay to your children and spouse or common-law partner on T4 slips, the same as you would for other employees. However, you cannot claim as an expense the value of board and lodging you provide to your dependent children and spouse or common-law partner.
You can deduct the cost of items consumed indirectly to provide the business's goods or services, such as the drugs and medication used in a veterinary operation, or cleaning supplies used by a plumber.
Telephone and Utilities You can deduct expenses for telephone and utilities, such as gas, oil, electricity, and water, if you incurred the expenses to earn income. The expenses for utilities that are related to business use of work space in your home have to be claimed as Business-use-of-home expenses.
Travel You can deduct travel expenses you incur to earn business and professional income. Travel expenses include public transportation fares, hotel accommodations and meals.