What Can You Deduct From Your Income?

When speaking to an accountant, the number one question that business owners ask is - “What can I write off? What is deductible from my income that I am receiving from my clients”.

When it comes to deductions the tax act is not very clear. It tells you that you can write off some things and you can't write off others. But there are a number of grey areas where this is no definition, so how do you know what you can write off?

In this video, Gabrielle Loren, presenter of Tax Tips from an Accountant, explains some of the basics of what you can and cannot deduct.

Gabrielle explains that the Canada Revenue Agency (CRA) defines a deductible expense as “any expense laid out to earn income”. So what are those expenses?  Here are some examples of areas which may cause confusion:

1) Advertising and promotion expense
Advertising is straight forward, an advertisement in a paper, magazine etc, but what is promotion? 

Promotion can be anything given as a tangible gift to a client to say thank you. The more your clients are happy the more business you will generate thus the CRA will allow the write off as you laid out this expense to earn income.

2) Entertainment
Entertainment is anything that involves a food item. Any expense involving food can be included as an entertainment expense. But it is not just limited to food, if you take clients to a hockey game or concert you can write this off as well.

The main rule is that you can only write off 50% of the cost. The reason being that the law assumes that you are benefiting from the expense personally by attending and therefore it is not deductible.

Want to Find Out More?

In her seminar, Tax Tips from an Accountant, Gabrielle delves further into what defines taxable income, allowable deductions, subcontractors versus employees, payroll traps and tax requirements.  In addition you will learn about tax issues that apply to you and how your financial statements information is viewed by others. 

If you would like to know more about taxable income why not book a consultation with a accounting professional from Loren, Nancke & Company, CGAs at one of Small Business BC's Ask the Accountant Days.  These days 30 minute consultations give you the opportunity to ask the specific tax questions you have for your individual business needs.  Appointments are available on select dates between May and August 2011.  All consultations must be booked in advance and will cost $40 plus taxes.