Be exhaustive, but use caution when navigating rules
Some small businesses miss out on benefits
Tax time is challenging at the best of times, but it’s even more confusing for sole proprietors and new business owners.
Debbie Lee, a registered acupuncturist, works out of at least five spaces and is self- employed at four of them.
She’s got a home office, rents space in two clinics, and works for Vancouver Coastal Health and the Portland Hotel Society using acupuncture to ease addiction and mental health issues.
How much of her home can she claim? What about the protective gumboots she wears to Vancouver’s Downtown Eastside? The black pants she wears to work? What about her home Internet, and the cleanses and detox diets she tests before recommending them to clients?
“The CRA website is sometimes hard to follow,” said Lee, who has a kinesiology degree plus five years of training in traditional Chinese medicine.
With taxes for sole proprietorships due April 30 and their T1 tax returns due June 15, many small business owners are stressing over which expenses they can deduct and which they can’t. And for those who have already done their duty, it can pay off to take a closer look at just what is deductible.
Most home- based business owners know they can claim a percentage of their home and costs such as utility bills, said Jennifer Steeves, Intuit’s TurboTax senior product manager. But few realize they can also claim a percentage of home maintenance and repair costs such as painting the house or repairing ( not upgrading) the driveway, she said.
But don’t get carried away. Generally, go ahead and claim expenses on your home office, but get individual advice before claiming increased value to part of the building itself, said Gary Luedke, a partner with Smythe Ratcliffe Chartered Accountants in Vancouver.
When calculating the percentage of your home used for business, look at the percentage of the space times the percentage of the use, Luedke said.
“Is it reasonable to say I’m using half of the space in my apartment as my office? Probably not. Ten per cent? It’s probably reasonable,” Luedke said. “Some people might get to 50 per cent because half the basement is full of inventory and they have another room for the office.”
Logging car mileage for business use can be a real chore. Luedke’s solution? “I have all my appointments in my Outlook calendar and I put in my driving time as part of tracking my day,” he said. He later converts the total to mileage.
Do you claim parking costs? These are often forgotten, Luedke said. Pay parking meters with your credit card for automatic record- keeping. Indeed, using one credit card exclusively for business expenses makes record- keeping a snap, Luedke said.
Claim the difference between to- and- from- work insurance and business- use insurance, plus a percentage of your remaining insurance cost.
If you drive to a course, record mileage expenses plus training fees, Steeves said.
When you go to school to be an acupuncturist, they don’t really teach you the business side of it.
DEBBIE LEE REGISTERED ACUPUNCTURIST
Ever eat out with business acquaintances who are friends? These meals, along with newspaper subscriptions, and a portion of home Internet and phone charges are also often forgotten, Luedke said. If the phone number is on your business card, you can likely deduct the full expense, he said.
You can also deduct the cost to pay a family member for a job you’d normally pay someone else to do, Steeves said.
Acupuncturist Lee sees clients in Vancouver’s leafy Oakridge as well as the gritty Downtown Eastside.
She wears gumboots when she works in the Downtown Eastside because bedbugs and fleas often travel in the seams of shoes, she said. The boots are definitely deductible, as is the mattress cover Lee uses when treating patients, Luedke said. But the black pants she wears to work are probably not. Everyday clothes such as suit jackets are not deductible, but nursing uniforms and steeltoed boots are.
“When you go to school to be an acupuncturist, they don’t really teach you the business side of it,” Lee said. She’s learned the work is cyclical with slow summers. Her expenses range from clinic rental ( most acupuncturists pay between 30 to 50 per cent of their fees in rent), to needles which range from $ 3 per 100 to $ 20 per 100. “Some are coated so they slide in better, some are thinner gauge, some have a better handle grip for better needle manipulation,” Lee said.
She’s decided to claim 15 per cent of her one- bedroom home as office space. “That was hard to measure because my office is my kitchen table. I store my files in a corner.”
She can write off the percentage of Internet costs used for work but not the full amount, Luedke said. Her cleanses are not deductible, he said.
Here are more tips drawn from questions commonly asked of Intuit’s Live Tax Advice agents.
• If you travel for business and your family comes along, you can claim your personal business expenses, Steeves said, but if you take advantage of a family vacation to do a little business, the expenses cannot be claimed at all.
• You can claim businessrelated expenses even without a registered business number. Sole proprietors should enter Jan. 1 to Dec. 1 as the fiscal year date on form T2125.
• Confused about capital assets and expenses vs. business expenses? A capital asset is something you’ve bought that has an enduring benefit, such as a computer, Luedke said. It probably isn’t worth the effort to record expenses under $ 200 as capital assets, he said.