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Ontario|Tax LawBusiness Taxes 187 Business expenses Sole proprietors, partners, and corporations can usually reduce the amount of tax they pay by deducting allowable business expenses from their income before applying taxes. Allowable expenses only include business expenses that were incurred for the sole purpose of earning business income, and not personal or living expenses.
- Types of deductible business expenses
There are many different types of business expenses.
Here are some of the main business expenses that can be deducted from business income: accounting and legal fees, expenses for advertising, fees and licenses necessary for business, employee salaries, interest and bank charges, up to 50 % of meals and entertainment that you pay for the purpose of earning business income. If you run a business out of your home, you can usually deduct partial expenses of rent, mortgage payments, insurance, electricity, and cleaning supplies.
- When can expenses be claimed?
Business expenses can only be claimed in the year they are incurred and you must have been in business during that time. If Canada Revenue Agency audits you or your business, you will usually have to provide dated receipts or purchase agreements for every expense you deducted from your income. Deducting business expenses can substantially reduce the amount of tax that you or your business pays. For additional information about business expenses, you should consult a tax lawyer or an accountant.
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