Every expense affects multiple areas of your business finances.Understanding how much of each expense is tax deductible allows business owners to be strategic in their spending. This not only helps save money at tax time from hosting holiday and company events, but can also reduce the chances of a CRA (Canada Revenue Agency) audit.
In this month’s blog, the team at McNabb Lucuk LLP has compiled several common business write-offs we get asked about from our Grande Prairie clients that can help lower your tax bill, regardless of where you are in Canada.
Tech and Gadgets
If you use laptops, phones, cameras or drones, for your business, these are deductible. The key in determining if the expense is eligible is that the device must be necessary for generating business income. You can expense significant technology expenses over multiple years and also need to record them as business assets. Speak to your accountant prior to large purchases for tax optimization advice.
Entertainment
Taking clients or prospects to events, or out for a meal, is 50% deductible. So next time you attend an Oilers’ game, hit up a show at the Grande Prairie Live Theatre, or go out for a steak dinner to celebrate the close of a contract, just half of the bill is a deduction. However, not all entertainment expenses qualify; season tickets, recreational facility fees, and greens fees are not included. Before claiming the deduction, consider if someone else would evaluate the entertainment cost as reasonable and directly related to business relationships.
Meals and Drinks
Business-related meals, whether it’s a client lunch or a casual coffee meeting, are also 50% deductible. There’s no need to expense gratuity from the bill, just claim meals that are directly related to business discussions or relationships. We recommend adding a note in your accounting software or directly on the receipt about who was at the meal and why to back up any qualified expenses.
Staff Events
When you invite all employees to a company event, such as a Christmas party or milestone meal, which shows your support or appreciation for staff, you can deduct 100% of the expenses. This is an excellent way to boost morale while enjoying full tax benefits. If the event is for one team or individual, the deductible expense reduces to only 50%.
Client and Sales Events
Appreciation nights or open houses are also fully deductible. Whether you operate a B2B or B2C business, you can use events as a tax advantaged part of your business strategy for new business and client retention.
Donations and Sponsorships
Charitable donations with official tax receipts are deductible. Sponsorships supporting a local team or community event are also deductible if the recipient promotes your business and your sponsorship contribution. This might include signage, social media content, or engagement opportunities for your business at the sponsored event.
Travel
Travel expenses for business purposes, including airfare, hotels, meals, and transportation, are deductible. When traveling more than 40 km from your primary place of business, meals are 100% deductible. We recommend keeping a detailed travel log that includes dates, destinations, and reasons for the trip along with all receipts to help your accountant maximize this deduction.
Conferences and Training
Travelling for or attending a local business-related conference and training seminars? Registration fees and travel expenses as outlined above for attending these events are also fully deductible. If you mix personal time with a business trip, your accountant can help divide the costs accordingly.
Accurately documenting details for each deductible expense as they happen will assist your accountant in finding significant tax savings for your business. Consult with a Chartered Professional Accountant to verify the deduction of expenses unique to your business and to ensure that you properly claim and expense all eligible write-offs. Contact McNabb Lucuk LLP’s business tax specialists now and head into the holiday season knowing which deductions you can claim later.
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