Want to stay on top of the CRA’s tax game? Claim as many business expenses as you can! Here are a few tax deductions in Canada you may not have heard of.

Bad debts

You are eligible for a deduction on a bad debt if you meet the following conditions:

  • You have fully established that an account receivable is an outright bad debt in a tax year.
  • Furthermore, you have included all the receivable income in the account.

Business start-up costs

You can also get some deductions on the expenses you incurred starting your business. However, you need to have a detailed record of the expenditure from the day your business sets off. Moreover, you need to determine whether the expenses were incurred before the start or in the initial stages of your business. Getting a start-expense can be complicated; consult a tax professional for

Interest and bank charges

You are eligible for a deduction on the interest incurred when you borrow money for business-related endeavours or to purchase property for your business. However, the deduction is limited to:

  • The interest incurred on the money used to purchase a passenger vehicle
  • The interest on a bid to purchase a vacant land
  • With the interest incurred on a real estate mortgage, you had to earn some fishing income.

Penalties, fees and bonuses paid to service a loan

Penalties, fees, and bonuses can be treated as prepaid interest hence qualifying as deductible expenses. For instance, if you choose to have the interest rates of a five-year loan reduced after about three years, you pay a fee, which can then be deducted over the remaining initial agreed term of your loan. This type of fee qualifies as a prepaid expense.

Insurance Policies Loan Interests

The interest you incur on loans made against an insurance coverage also qualifies for a deduction. However, you have to ensure your insurer does not add it to the insurance cover’s adjusted cost base. Moreover, before claiming at the end of the year, your insurance provider should have verified the interest before 16th June of the following year on Form T2210, Verification of Policy Loan Interest in the Insurer.

Do you have tax-related questions about your small business and tax deductions in Canada? Contact us for a consultation with one of our tax planning experts and find out how you can maximize your tax savings for your business’ year-end.

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