What can I deduct on my taxes?
Tax planning whether for personal or corporate taxes is a process that helps you reduce the amount of taxes you’ll owe at the end of each year.
In this second installment, I hope to highlight the expenses you can deduct on your taxes ( and the documents to be retained for potential future audit ).
In general, make good spending choices based on sound "economics" and the taxes will follow properly
WHAT CAN I DEDUCT?
Virtually everything you spend money on to support your business is deductible. Remember to save receipts for everything! No receipt = no deduction!
The spending needs to be reasonable and in support of your business. Incomplete, inconsistent or missing information may result in denied deductions. A good example is a Mileage log and meal receipt indicating greatly different locations.
CAN I DEDUCT MY HOME?
Yes, but the percentage needs to be reasonable. Mortgage interest, Property Taxes, Condo fees, Utilities are eligible. Major improvements to your home can't be deducted, but some maintenance expenses may be eligible.
WHAT ABOUT MY CAR?
A log book is mandatory! There are some great Apps to help, if not use paper.
This log will detail the use for business. The proportion of Business / Total mileage will determine the % business use. All fuel, insurance and maintenance expenses are considered but adjusted for this %. A per Kilometer rate is not applicable to non-incorporated businesses.
Vehicle financing costs are limited to a vehicle values at $30,000 regardless of the actual vehicle cost. Make sure the vehicle is appropriate for your business
MEALS and ENTERTAINMENT
These expenses are only 50% deductible.
Receipts must include the meal detail and the credit card slip. Credit Card statements are insufficient. you must indicate the name of client and the reason for the meeting on the receipt. Gift cards are included in this category.
Spending on Golf, boat, or cottage are not deductible.
OTHER IMPORTANT STUFF
Be careful not to include personal expenses such as life insurance and goods consumed by the family
Lastly, when you sign your tax return, you are declaring that your income tax return is "correct and complete and fully discloses income from all sources"
Your personal tax return will be more complicated than previously, so consider professional help to complete it.
Scott Gray, CPA, CMA, and his team, specialize in providing advice and recommendations to utilize tax savings through existing legislation and tax efficient strategies.