Another question we often get asked is – What expenses can I deduct?
This subject could cover a lot of territory so we are doing a series of quick blogs to cover the more common items. This is the second blog.
As a general rule a business can claim and deduct any expenses incurred to run the business.
But, there are a few that might not be obvious:
To be able to claim vehicle expenses you are required to keep a mileage log of business trips. This is important. Without a mileage log you might wind up in arguments with Canada Revenue Agency (CRA). If you don’t like the idea of keeping a mileage log there are electronic devices that will keep track of your trips for you.
With your mileage log, if you are operating a corporation, you claim the vehicle expense as a rate per kilometer. For example, if you drove 8,000 km in the year on business you would be able to claim about $4,000 for mileage. The rate per kilometer is set by CRA – give us a call for current rates.
If you are operating a proprietorship you can claim the vehicle expense as a percentage (business kilometers divided by total kilometers) and apply that percentage to the total fuel, maintenance, insurance and depreciation of the vehicle. For example, suppose your total vehicle operating cost plus depreciation totalled $12,000 in a year and business km was 1/5 of total km then you would be able to claim $2,400.
Give us a call and we’ll help you work out the correct amounts for your situation.