"Can I write this off?"
For sure you have been sitting there, out with lunch with some friends and they try to pass the bill to you. After all, “Just write it off.” After all, you own a business, and that’s what you do, right? But, can you?
Well, it’s not that easy. The first thing you must understand is that a write-off does not mean you’ll get all the money back. Most people misunderstand that aspect of the write-off process. Second, there are a great number of things you can write off as a business, and meals and entertainment is one of them, but not every meal is such. The main categories that you can write off include; Home-Office expense, vehicle expenses, Accounting and Legal, Office Rent, Advertising, Meals and Entertainment, Insurance, and Capital Assets. All of these have different rules surrounding them, and different things you can write off based on the category. We’ll break these down a little more so they make more sense.
Home-Office Expense
The amount you can write off is going to vary based on the amount of space you use as part of your home office. The easiest way to calculate it is the amount of the home that you have dedicated to your office space, which for most people is a single room. So, if you have a 1500 square foot home, and a 100 square feet of that is dedicated to your office, that gives you a 6.67% of your home dedicated to office space, and the amount you will be able to write off. While that might not seem like a lot, that value can add up quickly when it comes to issues.
Items eligible for write off include:
Mortgage interest on your residence
Utilities
Property taxes
Repairs & maintenance
Home insurance
Alarm and security services
Vehicle Expense
Like your home office, as a business you may be entitled to writing off a portion of your vehicle allowance, based on its use for business. This will require you keeping a log of the amount of use it gets as part of your business, of where there are plenty of digital options to work with.
It works like this - If you drive your vehicle, on average, 20,000KM a year, and half of that, 10,000KM is business, then you can write off 50% of your expenses related to that. Those include the following:
Capital Cost Allowance (for ownership/finance)
Interest on the loan
Lease payments (if leased)
Fuel
Insurance
Parking fees (if you park in a paid parking lot, for example)
Regular maintenance and repair
Toll charges
Vehicle registration fees
Accounting and Legal
When it comes to doing business, legal and accounting fees are an inevitably. As a business owner though, these can be things you turn to get back as part of your annual filing. When you deal with an account (such as ourselves) we provide a receipt, and can hold onto that for you. Bookkeeping, payroll, registration fees, all of it are able to be written off at your annual tax return.
Office Rent
If you are renting an office for your business, that is also considered a write off. If you have a copy of your lease agreement, and copies of the receipt for paying for the rent, at the end of the year you can write that off. Ensure you keep all your receipts though for up to seven years, in case you are ever audited by the CRA.
Advertising
By far the single most missed aspect of write-offs by businesses is marketing, which comes in three forms - Online, Television and Radio, Sponsorships, and Magazine and Newspaper, though the rules around the last one are the most complicated, and can vary wildly, so we won’t cover them here. If you are looking for more feedback, I would consult your accountant.
Online
Online marking is 100% deductible, and includes a lot more than you would expect. Social Media, ads, your website, hosting, and upkeep all count. There are a wide array of online advertising avenues you can take advantage of.
Television and Radio
For some, this is the big form of advertising people think of. If you deal with exclusively Canadian broadcasters, you are entitled to writing this off entirely as well. Though, if you deal with a non-Canadian broadcaster, you won’t be able to write that off.
Sponsorships
One of the areas a lot of people miss when it comes to advertising is sponsoring. This may come in the form of sponsoring a sports team, such as your local hockey team, or it may come from sponsoring an individual in the form of influencer marketing.
Meals and Entertainment
Here it is, at long last the answer to your question, can you write off that burger and fries you just had? The short answer to your question is yes, but only 50%. How it works is that, assuming you are taking a client out for dinner, a hockey game, or maybe just for coffee, you can consider half of that a business expense. There are some exceptions to this rule though. Staff parties are a 100% write-off (though you only get six a year, so keep that in mind). Also, if you provide food for a charity fundraising event, that is something that is eligible for a tax write off.
Insurance
For insurance, there are three types of primary insurance you can write off the premiums of as part of your corporate year end tax return. General Business Liability Insurance, Business Property Insurance, and Business Interruption Insurances. Further, if you have used your Life Insurance as part of your business loan, a portion of those premiums may be eligible for write-off.
Capital Assets
In Canada, the single largest tax write off for most companies is Capital Asset depreciation. Capital assets include things such as computers, furniture, light fixtures, property, and even vehicles purchased by the company; however, they cannot be written off in a single year. Each category has a rate it depreciates at, as determined by the CRA. They are the following:
Property and Buildings (4% per year)
Office furniture, fixtures and hardware (20% per year)
Software (50% per year)
Computers both portable and desktop, and computer related hardware (55% per year)
Vehicles (30% per year)
Most companies will choose to wait until their year-end to make capital purchases, which can then be written off for the company relatively quickly.
Other
There are going to be other write-offs you might be eligible that fall into niche categories. Often we are asked if, for example, your haircut may be eligible for write-off. While typically the answer to this question is “no” there are specific times it might be. For example, actors may be eligible to write off clothes and make up, though this an exception to the rule, and usually you will not be able to write these off.
Effective use of your companies tax write-offs can lead to a reduction of your company’s taxable income, and the amount of taxes you are required to pay. That said, this is a general guide, and is not something that can be referenced as the hard truth. We recommend coming and talking to one of our accountants in person, to discuss your specific needs as a business, and make sure you have everything set up correct to file.
