List of Tax Deductions for a Canadian Sole Proprietorship
As in the United States, Canada collects annual income taxes. If you are self-employed, owning a business as a sole proprietorship, there are many tax deductions available to you when filling out your tax return.
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Canadian Tax Returns
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The Canada Revenue Agency (CRA) collects annual income taxes from Canadian citizens. Tax returns must be filed with the agency by June 15 every year. The CRA has numerous offices throughout Canada, several in each province or territory.
Sole Proprietorships
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A sole proprietorship is a business owned and operated by one person, who owns all the assets and is responsible for all the liabilities or losses. A sole proprietorship does not require a separate business tax return. Owners simply include the business' profits and losses on the self-employment lines of an individual or joint tax return.
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Tax Deductions for Sole Proprietorships
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The CRA allows sole proprietors to deduct any reasonable expenses associated with the business. However, the expenses must be paid out of the business' income.
Business Expenses
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The following are examples of business expenses that are considered reasonable and are acceptable tax deductions.
1. Start-up costs: If you started a business during the fiscal year and incurred expenses in the preliminary steps of creating the business, before normal day-to-day operations began, those costs can be deducted on your tax return.
2. Rent: If you pay on a building, land or office space where your business is located and/or operates, that amount is a tax deduction.
3. Salaries: If you have any employees, you can deduct the amount of their gross salaries.
4. Telephone and utilities: If you have a business telephone number or you pay any utility bills, including oil, gas, electricity and water, the amount of those bills is a tax deduction.
5. Supplies: The cost of any supplies utilized in the day-to-day operations of your business, for example, medications and surgical tools used by a veterinarian can be deducted.
6. Office expenses: The cost of office supplies, like pens, pencils, stationery and postage stamps is also an acceptable tax deduction.
7. Capital cost expenses: The more expensive purchases for an office, including office furniture and equipment, like machinery, computers or copy machines, are considered in a separate category, for capital costs, but are still a tax deduction.
8. Travel: If your business requires that you or your employees travel, the costs of transportation, hotel accommodations and meals, so long as they are paid from business income, can be deducted as an expense.
9. Professional fees: If you pay for outside professional services, such as legal or accounting, the cost of those fees is a tax deduction.For a complete list of tax deductions available for sole proprietorships, visit the CRA's website at http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/bsnssxpnss/menu-eng.html.
What Cannot be Deducted
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While there is an extensive list of the business expenses that a sole proprietor can deduct on his taxes, personal expenses can never be deducted.
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