Company Write-offs

[likwid]

Due to all the contract work I do on the side, I am looking to start up a private company in the near future. I'd like to take full advantage of what this may offer, but I have a few questions for anyone who is able to assist me.

When I start up my own business, what are the rules and percentages when it comes to writing off certain expenses? What I'd like to do is lease my next car under my company. How much of this can I write off, and do you know if I am able to combine my personal income and the company's income to get this car? Also, how much of my mortgage would I be able to write off since this will be a home based business?

Also, let's say for a $10,000 dollar project. How much of that would be taxed if I am paying myself from the company?

Thanks

[dr_jared88]

It's based on percentages. If you use your car 30% for work then you can write off 30%. Same goes with fuel and even your house if you use a section of your house for business. Don't try to write off too much though or you'll have a higher chance of being audited which is never fun.

[Xtrema]

Keep a log for your car if that's your ONLY car. If you have 1 car more than you have drivers in that household, than that car can be written off completely and dedicated to the business.

They are really strict when it comes to cars.

[Tik-Tok]

Originally posted by likwid
Also, how much of my mortgage would I be able to write off since this will be a home based business?

Thanks

If your actual work is done elsewhere, you can't claim any of your mortgage interest. IE- if you're a plumber, doing jobs on the side, since your jobs are all in other people's houses, you can't claim any of your mortgage interest, HOWEVER, if you have an office in your house, that clients meet you in to, say, plan a new bathroom, you can claim whatever % of your house, that office occupies.

[Jlude]

there are plenty of things you can write off, depending on what you're doing.

If you incorporate, it opens up plenty of options... like leaving the money mostly in the company and paying MUCH less tax, later you can invest that money into many different things.

[likwid]

Originally posted by Tik-Tok


If your actual work is done elsewhere, you can't claim any of your mortgage interest. IE- if you're a plumber, doing jobs on the side, since your jobs are all in other people's houses, you can't claim any of your mortgage interest, HOWEVER, if you have an office in your house, that clients meet you in to, say, plan a new bathroom, you can claim whatever % of your house, that office occupies.

I work full time, however I do various IT work from my home office on the side. I live with a common law wife, and we have one car together in both of our names, but I would like to get another one in my name/company only so that I am able to write some of it off.

[Tik-Tok]

Originally posted by likwid


I work full time, however I do various IT work from my home office on the side. I live with a common law wife, and we have one car together in both of our names, but I would like to get another one in my name/company only so that I am able to write some of it off.

Office - The % of sq.ft of your office in your home, compared to your entire home is a tax write-off

Car - Probably not happening, as you don't need to travel as an IT guy.

[Mckenzie]

Charge mileage to your company, dont write off vehicle expenses.

You can deduct the mileage from the corporate income and it is not taxable personally.

[adam c]

Originally posted by Tik-Tok


Office - The % of sq.ft of your office in your home, compared to your entire home is a tax write-off

Car - Probably not happening, as you don't need to travel as an IT guy.

are you crazy? there is tonnes of travel as an IT guy
my previous IT job had me going all over canada

[Tik-Tok]

Originally posted by adam c


are you crazy? there is tonnes of travel as an IT guy
my previous IT job had me going all over canada

As a side-job IT guy? OP's working fulltime at a normal job, and only doing IT work on the side, something tells me he won't be travelling all over Canada for that.

[adam c]

doing IT on the side and visiting clients in their offices will require travel

all depending on the type of IT side work though

[adamc]

I imagine Revenue Canada will accept IT as a profession that requires a certain degree of travel.


Top the OP, speak to an accountant, a good one will be able to help you set up your business (Corporation, LLP, or sole proprietorship) and make sure you're following federal tax regulations.

[Jlude]

Originally posted by adamc
I imagine Revenue Canada will accept IT as a profession that requires a certain degree of travel.


Top the OP, speak to an accountant, a good one will be able to help you set up your business (Corporation, LLP, or sole proprietorship) and make sure you're following federal tax regulations.

Good Advice.

It's fine if you want to learn the accounting side and do it all yourself after you get things rolling, but I would (I did) hire an accountant to help set everything up and let you know what you can and cannot write off.

[Xtrema]

Originally posted by adam c
doing IT on the side and visiting clients in their offices will require travel

all depending on the type of IT side work though

I have been doing IT side jobs for over a decade with a standard salary full time job.

There IS NO WAY you can write off a car in this situation without an audit that won't fuck you up.

The ONLY way it can happen is that he's a contractor for his day job as well AND he has to proved to have more than 1 client and 1 site at any single time to warrant the travel. Contractor with just 1 client and 1 site does not meet the requirement either.

The fact that he and his partner only have 1 car hurt the case even more. He would have to document every single km and it's purpose.

% of Utilities, communication (phone, internet), and mortgage interest are all fair games.

OP, I think your situation is exactly same as mine. My conservative accountant has said NO to me for a decade now on the car. If you can find an accountant that say you can do it, please let me know.

[5000Audi]

for a car, you can write off a % of it for company use, when i was working as a self contractor i did the same thing, i kept every gas recipt, oil change record and in the end i think i wrote off about 80% of everything with my car..since it was used to drive to and from job sites and whatnot...best bet dont go to his accountant lol.. find a differant one.. in my position its easy since my mother is a registered accountant hehe

[Xtrema]

Originally posted by 5000Audi
used to drive to and from job sites

Proving this is key and that's why you can do it.

And if your IT business is Geek Squad type of business, not a problem either. But a lot of IT has desk jobs for months on end and Revenue Canada does not recognize it.

[Mar]

I was going to start my own thread but I can just post it here. I have questions regarding specifics and want to know what I can write off.

Car - I use my car probably 80% for work. I rarely go anywhere that's not work related, boring life I know but it's expected when starting a business. So is it just gas and maintenance? What about mileage? Someone said charge it to the company? How does that work?

House - As many know I'll own 100% of my house as of November 1 and can dedicate any portion of it to my work......which usually consists of kicking back on the couch with my laptop. So I know I can write off that square footage in the house as a portion of the mortgage but do I count the basement square footage when doing the calculation? What if the office is in the basement? What if it's not? Someone else told me I can rent a room out to my company at a reasonable price, is this possible instead? If my mortgage is $700 per month (don't ask) for a 2 bedroom then I would assume I can rent out the second room for about $700 which would be a fair price for rent in that area. Would that be legal? And then a percentage of the bills as well?

Computer equipment - They changed the laws around this so I know I can write off 100% of my equipment in that tax year instead of doing it over 5 years like I would something else. How about my projector? I pretty much only use it for work, kicked back on the couch with the projector on the wall, I rarely if ever use it for anything else.

Cell phone - From what I've read on the Canada Revenue website, this is considered a piece of computer equipment and can therefore fall into the above category of a 100% writeoff for the equipment and percentage for the monthly bills.

Food - I'm currently at a client site for a few months so I'm here 9-5 every day Monday-Friday which requires me to eat lunch here. Every day I go to Sunterra and get a receipt, is this a writeoff since I can't go home?

Clothing - I need nicer clothes to be at certain client sites, what's the deal with writing off clothing purchases? I'm talking about polo shirts and simple stuff like that. Maybe some nice jeans, mine are all walked out.

Now that's all fine for writeoffs for my business and I know I can only do a certain percentage of things like a car. However I've heard of people starting 10-20 different companies that all show a minor income annually just so they can write off more of things like a vehicle. So say I use my car 25% for my website design business and then use it another 40% for my Transformers resale business (I made that up), does that mean I can write off 65% of my car? And then just keep starting new companies to write off 100% of my life? But do it legally I mean, not just scam the system.

[Bisklimpkit]

I mostly use my car for work, as well. I track my mileage in a log book for every trip that I make to my clients. At the end of my fiscal year, I personally issue a mileage claim to my company. You can claim $0.52/km for the first 5000km and $0.46/km for everything above 5000km. My company gets to write off the bill for mileage, and I get to take the money for the mileage to the bank, and pay no tax on it (mileage is not taxable as income). This is far easier than tracking bills for fuel and maintenance, and gets you a better benefit, not to mention not having to prove how much fuel and maintenance you are writing off due to percentage use for work.

I write off 15% of my utilities and mortgage interest, 50% of my home phone and internet, and 100% of my cell phone (the cell is registered to my company). I use my entire basement as my office, but if I were to write off 50% of my bills and mortgage interest because that's the space my office takes up, I'd probably set myself up for an audit. Even though I feel I'd breeze through an audit, I'd rather not go through the hassle so I have my write offs reduced to something that isn't likely to catch the eye of the CRA.

I can't speak to the food or clothing.

[Jlude]

Originally posted by Mar
I was going to start my own thread but I can just post it here. I have questions regarding specifics and want to know what I can write off.

Car - I use my car probably 80% for work. I rarely go anywhere that's not work related, boring life I know but it's expected when starting a business. So is it just gas and maintenance? What about mileage? Someone said charge it to the company? How does that work?

House - As many know I'll own 100% of my house as of November 1 and can dedicate any portion of it to my work......which usually consists of kicking back on the couch with my laptop. So I know I can write off that square footage in the house as a portion of the mortgage but do I count the basement square footage when doing the calculation? What if the office is in the basement? What if it's not? Someone else told me I can rent a room out to my company at a reasonable price, is this possible instead? If my mortgage is $700 per month (don't ask) for a 2 bedroom then I would assume I can rent out the second room for about $700 which would be a fair price for rent in that area. Would that be legal? And then a percentage of the bills as well?

Computer equipment - They changed the laws around this so I know I can write off 100% of my equipment in that tax year instead of doing it over 5 years like I would something else. How about my projector? I pretty much only use it for work, kicked back on the couch with the projector on the wall, I rarely if ever use it for anything else.

Cell phone - From what I've read on the Canada Revenue website, this is considered a piece of computer equipment and can therefore fall into the above category of a 100% writeoff for the equipment and percentage for the monthly bills.

Food - I'm currently at a client site for a few months so I'm here 9-5 every day Monday-Friday which requires me to eat lunch here. Every day I go to Sunterra and get a receipt, is this a writeoff since I can't go home?

Clothing - I need nicer clothes to be at certain client sites, what's the deal with writing off clothing purchases? I'm talking about polo shirts and simple stuff like that. Maybe some nice jeans, mine are all walked out.

Now that's all fine for writeoffs for my business and I know I can only do a certain percentage of things like a car. However I've heard of people starting 10-20 different companies that all show a minor income annually just so they can write off more of things like a vehicle. So say I use my car 25% for my website design business and then use it another 40% for my Transformers resale business (I made that up), does that mean I can write off 65% of my car? And then just keep starting new companies to write off 100% of my life? But do it legally I mean, not just scam the system.


I'm in the engineering industry (doesn't exactly require high end clothing) and I can't write off any of my clothing. You probably can't either.

Cell phone and cell bill can be expensed.


As for your mileage, I submit an expense claim every month along with my receipts, bank statements and invoices to my accountant.

As just mentioned, mileage is .52 cents up to 5000km and 46 cents above 5000klms.

My company is incorporated and registered in New Brunswick, so the laws might be different in Alberta.

[autosm]

If you claim a home office, tax may be due when said home is sold? Mortgage interest is what I am refering to.

Might be a reason not to do it unless it really is used for that and the pro's out weigh the potential tax implications?

This is the advice to me from my accountant but I had a business location separate from my home. My accountant used to work for CCRA.

[Xtrema]

Originally posted by autosm
If you claim a home office, tax may be due when said home is sold? Mortgage interest is what I am refering to.

Might be a reason not to do it unless it really is used for that and the pro's out weigh the potential tax implications?

This is the advice to me from my accountant but I had a business location separate from my home. My accountant used to work for CCRA.

http://www.bookkeeping-essentials.com/home-office-expenses.html