Congratulations on starting up a new business. Apart from keeping your books, now you might be wondering what you can claim as a deduction on your small business tax return (T2125). Here is a list of most common deductions claimed by small businesses.
Start Up Costs
Cost of registering your business as well as other incidental costs like accounting fees, legal fees or any other consulting fees incurred in relation to your start up can be claimed on your tax return. Please note that there is no specific line to claim all the costs together, rather you will have to break these costs individually and claim on separate lines.
Financing Costs
You might be arranging for your business finance at the very start providing a business liability even before earning any income. So, don’t be scared, all the interest paid or payable on that business loan can be claimed as a deduction on your tax return. Mind you, if you have paid some professional fees to some broker or advisor for arranging a business loan, you can also deduct them.
Advertising
It would be really hard to run a successful business without people knowing about your product. So definitely, you might be advertising in newspapers, flyers, and social media or in any other manner. Whatever cost you are incurring on business advertising, you can claim it on your tax return.
Telephone
Can you survive in 21st century without telephone? The answer is most probably no. Typically most small business owners initially use their personal phone for business purpose as well. So, there is good news for you, you can claim the business portion on your tax return. Although you might not have detailed breakup of your personal and business calls but a ‘rough’ break up would work. So, for example, if your total bill is $200 for a specific month and 60% is business use, then you can claim $120 as your business expense. Same pattern would follow for other months.
Rent
If you are not running the business from your home, then definitely you would need to rent office space. All the rent paid for your office is a claimable deduction on your tax return.
Motor Vehicle Expenses
If you are using your personal vehicle for your business, then you would be better more organized. As your personal and business travelling is mixed here, so the CRA typically asks for a travelling log book recording all your business trips with exact date and mileage. All motor vehicle expenses like fuel, repair & maintenance, car washes, insurance, license & registration etc. can be claimed as a business deduction.
All the vehicle expenses will be allocated based on your personal and business mileage proportion. So, you would be better to record vehicle mileage for business and in total.
Unfortunately, you can’t claim the cost of your vehicle; rather it will be claimed in the form of an annual depreciation charge.
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