If you've traveled to conduct business over the past year, have you deducted all related travel expenses when calculating your small business tax deductions?
While you can't usually claim any of your living costs as business expenses, expenses you incurred while you were away from home if your travel was related to earning business income are legitimate income tax deductions. Once again, any and all such deductible expenses need to be documented with receipts.
You may, for instance, be able to deduct the cost of accommodation, or the cost of taxis or other transportation. You may be able to claim the costs of meals, beverages, and entertainment as well, although you won't be able to deduct their full cost.
The general rule for tax deductions related to meals and/or entertainment is that you may deduct up to 50 percent of the cost of meals and/or entertainment, or "an amount that is reasonable in the circumstances, whichever is less" (Business and Professional Income Guide, CRA). For detailed information about these expenses, see The Rules for Meals and Entertainment Expenses on Canada Income Tax.
Conventions are another income tax deduction you don't want to overlook. You can deduct the cost of attending two conventions or conferences a year as a business expense, as long as the conventions you attend are directly related to your business (so going to the Grey Cup won't count, but attending a trade show might). You'll find the details about how to deduct convention expenses in The Rules for Meals and Entertainment Expenses on Canada Income Tax too.
If the cost of the convention doesn't include the cost of meals, then the general rule applies, and you may deduct up to 50 percent of their cost. If the cost of the convention does include the cost of meals, beverages, and/or entertainment, and these aren't shown separately on your bill, then calculate the cost of these by subtracting $50 for each day these are supplied from the total amount of the convention cost. Sorry - food and beverages don't include incidentals such as coffee or doughnuts!
Another common tax question is how employing your spouse or your child in your small business affects your income tax. The next page of this article explains the conditions that must be met before you claim your spouse or child's income as a small business tax deduction. Continue on to page 3...