Other business expenses
There are expenses you can incur to earn income, other than those listed on Form T2125. Enter on this line the total of other expenses you incurred to earn income, as long as you did not include them on a previous line. You have to list these expenses on the form.
Some of the more common ones are:
Disability - related modifications
You can deduct expenses you incur for eligible disability-related modifications made to a building in the year you paid them, instead of adding them to the capital cost of your building.
Eligible disability-related modifications include changes you make to accommodate wheelchairs, such as:
- installing hand-activated power door openers
- installing interior and exterior ramps
- modifying a bathroom, an elevator, or a doorway
You can also deduct expenses paid to install or get the following disability-related devices and equipment:
- elevator car-position indicators (such as braille panels and audio indicators)
- visual fire-alarm indicators
- telephone devices to help people that have a hearing impairment
- listening devices for group meetings
In addition, you may be able to deduct expenses for disability-specific computer software and hardware attachments.
Computer and other equipment leasing costs
You may lease:
- cellular telephones
- fax machines
- other similar equipment
If so, you can deduct the percentage of the lease costs that reasonably relates to earning your business income. You can also deduct the percentage of airtime expenses for a cellular telephone that reasonably relates to earning your business income.
If you buy a computer, cellular telephone, fax machine, or other such equipment, you cannot deduct the cost. You can deduct capital cost allowance and interest you paid on money you borrowed to buy this equipment that reasonably relates to earning your business income.
Property leasing costs
Deduct the lease payments incurred in the year for property used in your business.
If you lease a passenger vehicle, go to Motor vehicle - Leasing costs.
If you entered into a lease agreement after April 26, 1989, you can choose to treat your lease payments as combined payments of principal and interest. However, you and the person you are leasing from have to agree to treat the payments this way.
In this case, we consider that you:
- bought the property rather than leased it
- borrowed an amount equal to the fair market value (FMV) of the leased property
You can deduct the interest part of the payment as an expense.
You can also claim capital cost allowance on the property.
You can make this choice as long as the property qualifies and the total FMV of all the property included in the lease is more than $25,000. Digging equipment that you lease with a FMV of $35,000 is property that qualifies. However, office furniture and passenger vehicles often do not qualify.
To treat your lease this way, file one of these forms with your income tax return for the year you make the lease agreement:
You can deduct the cost of attending up to two conventions a year. The conventions have to:
- relate to your business or your professional activity
- be held by a business or professional organization within the geographical area where the organization normally conducts its business
This second limit may not apply if an organization from another country sponsors the convention, and if the convention relates to your business or professional activity.
Sometimes, convention fees include the cost of food, beverages, or entertainment. However, the convention organizer may not show these amounts separately on your bill. If this is the case, subtract $50 from the total convention fee for each day the organizer provides food, beverages, or entertainment.
You can deduct this daily $50 amount as a meal and entertainment expense. However, the 50% limit applies to the daily $50 amount.
Food, beverages, or entertainment at a convention do not include incidental items such as coffee and doughnuts available at convention meetings or receptions.
You can deduct an amount for a reserve, contingent account, or a sinking fund as long as the Income Tax Act allows it and the amount is reasonable.
Private health services plan (PHSP) premiums
New position on private health plans
The Canada Revenue Agency has taken a new position on what qualifies as a private health services plan (PHSP) as of January 1, 2015. For more information, go to New position on private health services plans - Questions and answers.
You can deduct premiums paid or payable to a private health service plan (PHSP) if you meet the following conditions:
- your net income from self-employment (excluding losses and PHSP deductions) for the current or previous year is more than 50% of your total incomeFootnote 1, or
- your income from sources other than self-employmentFootnote 2 is $10,000 or less for the current or previous year;
- you are actively engaged in your business on a regular and continuous basis, individually or as a partner; and
- the premiums are paid or payable to insure yourself, your spouse or common-law partner, or any member of your household.
You cannot claim a deduction for PHSP premiums if another person deducted the amount, or if you or anyone else claimed the premiums as a medical expense.
For your premiums to be deductible, your PHSP coverage has to be paid or payable under a contract with one of the following:
- an insurance company
- a trust company
- a person or partnership in the business of administering PHSPs
- a tax exempt trade union of which you or the majority of your employees are members
- a tax exempt business organization or tax exempt professional organization of which you are a member
For this claim, the following terms apply:
- Arm's length employees are, generally, employees who are not related to you and not carrying on your business with you, for example, as your partners.
- Qualified employees are arm's length, full time employees who have three months service since they last became employed with a business carried on by you, a business in which you are a majority interest partner, or a business carried on by a corporation affiliated with you. Temporary or seasonal workers are not qualified employees.
- Insurable persons are people to whom coverage is extended and who are either:
- qualified employees
- people who would be qualified employees if they had worked for you for three months
- people carrying on your business (including yourself and your partners)
If you deduct only a part of your PHSP premium on Form T2125 and you paid the premium in the year, you can include the undeducted balance when you calculate your non-refundable medical expense tax credit. For more information, go to Line 330 and 331 - Eligible medical expenses you can claim on your tax return.
Forms and publications
- Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income
- Form T2125, Statement of Business or Professional Activities
- Guide T4037, Capital Gains
- Guide T4011, Preparing Returns for Deceased Persons
- Form T2017, Summary of Reserves on Disposition of Capital Property
- Interpretation Bulletin IT-154R, Special reserves
- Interpretation Bulletin IT-442R, Bad debts and reserves for doubtful debts
- Interpretation Bulletin IT-131R2, Convention Expenses
- Interpretation Bulletin IT-339R2, Meaning of 'private health services plan' (1988 and subsequent taxation years)
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