As the tax return season approaches, many Quebec entrepreneurs are wondering what tax credits they are entitled to. These entrepreneurs can receive numerous tax breaks for some expenses incurred to earn business income.
Here are some of the business expenses eligible for tax deductions and, in some cases, tax credits.
Meals and entertainment expenses
Whether for soliciting or retaining clients, companies can spend considerable amounts of money on entertainment. These include expenses incurred by a member of the organization to attend cultural activities or sporting events with potential business partners. These expenses are 50% tax deductible.
The purchase of food and drinks, whether for entertainment purposes or not, is also 50% tax deductible. Taxes on meals, tips left to servers and entrance fees charged in some establishments can be included in the expenses declared by a company.
It is important to note, however, that tax deductions for entertainment expenses in Quebec are limited to an amount ranging from 1.25% to 2% of the company's annual sales.
Legal and accounting fees
Legal and accounting fees paid to outside firms for advice, consultation or services are other expenses that can be included in a company's tax return.
Organizations can therefore benefit from tax credits if they need to hire a lawyer to prepare an opposition or appeal and they are successful. For accountant or tax professional fees, they include preparing tax returns and GST/QST returns and bookkeeping.
A small exception is that you cannot include the legal fees paid to finalize the purchase of capital assets in this type of expense. Rather, they should be included in the cost of the asset.
When properly compiled and accounted for in a travel record, expenses related to the use of a motor vehicle incurred to earn business income can be deducted from income. However, there are some legal limits at this level.
An employer can therefore deduct an employee's transportation expenses if they do not exceed $0.58 for the first 5000 kilometres and $0.52 for all additional kilometres (be careful, the rate fluctuates from year to year).
In the case of public transit, an employer can receive tax relief equal to twice the expense incurred when reimbursing the costs of passes used to get to work.
Ensure you get the maximum tax deductions
If all these business expenses are properly compiled and included in a company's tax return, the resulting tax relief can be highly beneficial. Of course, other types of expenses may be eligible for tax credits.
To learn more about this subject, don't hesitate to ask T2inc for advice. Our team, which specializes in corporate taxation, can help you benefit from the maximum number of deductions.