A Guide To Determining Your Business Expenses
To begin, let’s answer the question, what are business expenses? Also referred to as deductions, business expenses are ordinary and necessary costs incurred to operate your business. Business expenses can be further divided into fixed and variable expenses. Fixed expenses are regular and don’t change much. They include things like rent and insurance. Variable expenses are expected, but they can change. Some examples include sales commissions, gas for business vehicles, and shipping costs.
Similar to business expenses, Home office expenses are expenses incurred from the operation of a business or the performance of employment-related activities within a primary residence. Whether you operate out of your home or an office, tracking your business expenses helps you keep an eye on whether you’ll see profits or losses.
To help you figure out where you stand and what to expect in terms of business success, JT Comptabilité CPA et Consultation has listed three things to consider when determining your business expenses.
1. Keep qualifying factors in mind
To qualify for business-use-of-home expenses, specific criteria must be met and followed. First, you must use the home workspace only to earn your business income. Use it on a regular and ongoing basis to meet clients, customers, or patients. You also cannot have another office at a second location and claim home workspace expenses
2. Understand what can be considered business meal expenses
Generally, a meal is a tax-deductible business expense when traveling for business, at a business conference, or entertaining a client. Unless a meal is for the purpose of earning business income, such as taking a client out for dinner, the cost of the meal is not deductible. This means that going for lunch by yourself is not deductible.
3. Determine motor vehicle or car expenses
To calculate the deductible amount of motor vehicle expenses, you must determine the percentage of business use for the vehicle by establishing the ratio between the number of kilometers traveled for business purposes in your fiscal period, and the total kilometers traveled in that budgetary period. You see, if you use a motor vehicle or a passenger vehicle for business and personal use, you can deduct only the part of the expenses you paid to earn income.
For more information and ways to save and make money and all the expertise you need to keep your accounts up to date and in order, reach out to JT Comptabilité CPA et Consultation. As a leading accounting firm, we are committed to providing the highest levels of customer service to our clients. Our team of qualified CPA experts is invested in your success, and nothing gives us greater pleasure than seeing your business grow financially. Our services include tax and accounting, business consulting, business immigration, work permits, and consulting in Canadian taxes, accounting, and business immigration.