What can you claim as expenses when you are self-employed?
When you're compiling your documents to give to us to complete your tax return, these are some of the costs that usually count as allowable business expenses.
Office expenses
You can include business stationery, printing costs (including printer ink) and postage. You can also include business equipment like computers and printers and computer software, but you may have to include these in your asset register, and claim the depreciation (accounting) and capital cost allowance (tax) if the asset is over +- $500.
Business premises
You can claim expenses for rent, maintenance and repairs, utility bills, property insurance and security. You can’t claim expenses for buying or building your business premises.
If you run your business from home, you can include part of your home utility bills, but you need to work out the proportion of your home that’s used for business. This is done using the square footage of the space dedicated to your home office in proportion to the square footage of your total home.
Travel
You can include business-related car or van costs including vehicle insurance, fuel, hire charges, repairs, servicing and breakdown cover. Please do note that you will need to keep a daily travel logbook, noting your business and private mileage (we recommend MileIQ for this).
You can also include business travel by train, bus, plane or taxi, and hotel rooms and meals during overnight business trips.
Bear in mind that while travel for meetings and site visits are included, you can’t claim for the cost of travelling between home and work. Commuting or travelling to your business premises doesn’t count.
Also note that if you take a journey for both personal and business reasons, you must be able to separate the business cost in order to include it.
Inventory
You can include the cost of your inventory, your raw materials, and the direct costs that arise from producing your goods.
Legal and financial costs
If you need to hire a professional like an accountant, a solicitor/lawyer, a surveyor or an architect for business reasons, you can include the cost in your calculation.
You can also include bank, overdraft and credit card charges, interest on bank and business loans, hire purchase interest and leasing payments.
Business insurance
You can include the cost of business insurance, for example public liability insurance and professional indemnity insurance.
Marketing
The cost of marketing including newspaper advertising, directory listings, free samples and website costs can be claimed.
Clothing
You can include the cost of uniform, necessary protective clothing, or costumes for actors or entertainers, but you can’t include the cost of everyday clothing that you wear to work.
Staff costs
Employee and staff salaries count as allowable expenses, as do bonuses, pension contributions, benefits and agency fees. There are specific regulations regarding whether gifts to employees can be deducted. It's best to contact us for further details if you choose to give a gift to one of your employees.
Subscriptions
You can include the cost of membership to trade bodies or professional membership organizations if they’re relevant to your business, and the cost of subscriptions to trade or professional journals.
Calculating your business expenses for your tax return
You should keep receipts or other proof of your income, expenses and purchases for seven years. You don’t need to include these with your tax return, but you may need to present them if the CRA decides to audit your tax return.
Here is the T2125 Statement of Business or Professional Activities form that all of these business expenses get reported on.
We have a sample Excel template that can help you keep track of your expenses monthly.
Use this sample mileage log and visit our page about mileage tracking.