Archives: FAQs

Can I deduct massage expenses on my personal income tax return?

Question: My employer offers me employment benefits that covers $750 for massages. If I incurred extra, can I claim it as medical expense on my personal tax return? Answer: Generally speaking, the medical expense incurred by an individual from an authorized medical practitioner that is registered is eligible for claiming medical expenses for tax purposes. … Continue reading Can I deduct massage expenses on my personal income tax return?

How are capital gains determined?

My business has capital assets, including office furniture, equipment and vehicles. I sold these assets during the year and my accountant told me that I have a capital gain. What does this mean? Selling assets can trigger a capital gain or capital loss based on the selling prices minus the original cost. If the selling … Continue reading How are capital gains determined?

What do the terms recapture of Capital Cost Allowance (CCA) and Terminal Loss mean?

Question: My company sold capital assets (including a building, furniture and equipment). I see the terms “Recapture” and “Terminal Loss” on my corporate tax return, what do these mean? Answer: When you purchase capital assets (e.g. vehicles, buildings, furniture, computers, equipment), the Canada Revenue Agency (CRA) applies specific depreciation (CCA) rates. The rates are a … Continue reading What do the terms recapture of Capital Cost Allowance (CCA) and Terminal Loss mean?

Can I write-off leasehold improvements?

Question: I recently moved into a new building and was required to cover the cost of making the new space suitable for my purposes. This included purchasing new lighting, installing new flooring, internal walls and wall coverings. Is it possible to write off these expenses from my business? Answer: According the the Income Tax Act, … Continue reading Can I write-off leasehold improvements?

Is clothing purchased for business use tax deductible?

Many professions are required to purchase expensive clothing such as business suits, ties shirts etc. The CRA has a strict guideline on determining if business clothing can be tax deductible. You can deduct the cost of work clothes if the following two conditions are met: You must wear them as a condition of your employment … Continue reading Is clothing purchased for business use tax deductible?

Are moving expenses a tax deduction, could you explain?

Moving expenses can be incurred by someone for relocation to commence business or employment in another part of Canada. This type of expense can be deduct to the extent of income earned in the new location – means the deduction is limited to the amount of employment income or business income earned at the new … Continue reading Are moving expenses a tax deduction, could you explain?

What is the criteria for a small business in Canada?

According to Industry Canada, a small business is one that has 5 to 100 employees. For CRA purposes in order to meet the small business deduction (SBD) and be eligible for the lower tax rate of 15.5% (combined Federal + Ontario),  the business must meet the Canadian-controlled private corporation (CCPC) criteria and have active business income up … Continue reading What is the criteria for a small business in Canada?

What is the ‘small business deduction’?

The small business deduction is a reduction in corporate taxes for Canadian Controlled Private Corporation, known as CCPC. The small business deduction is provided as an annual tax credit that is calculated as 17% of the least of the corporation’s: Active business income for the year taxable income for the year business limit ($500,000)

Why is my bank asking me for “reviewed” financial statements?

In certain circumstances when applying for a loan or maintaining a loan from a bank, they require yearly reviewed financial statements signed off by a designated accountant.  In the event you fail to provide the reviewed financial statements you can be in default of the loan agreement and the bank can request the money back. … Continue reading Why is my bank asking me for “reviewed” financial statements?

What does the CRA mean by other sources of income?

This is a catch-all category that captures taxable income which does not qualify as one of the primary sources. Major types of other income include: Benefits received from RRSP (including from a registered retirement income fund) Employer pension plan Old-age security from the government of Canada Benefits from employer’s deferred profit-sharing plan Canada, Quebec, or … Continue reading What does the CRA mean by other sources of income?

If I am a non-resident of the US, do I need a social security number to file taxes?

As a non-resident of the US, you will require an ITIN (International Tax Identification Number) to file US Tax Returns. In order to receive this number you will need to fill out form W-7 and attach it with your US Tax Return for the year.

Can I purchase a company that has a history of losses to offset the profits of my company?

Question: I am thinking of acquiring a loss-generating business and planning on using its loss to offset the profits that my company is generating, can I do this? Answer: In certain cases, you can. However, you need to be aware of the “acquisition of control rules”. This prevents a profitable corporation from acquiring a corporation … Continue reading Can I purchase a company that has a history of losses to offset the profits of my company?

What amount can I charge to my company in terms of per diem travel expenses?

The CRA looks at what is deemed reasonable in terms of travel expenses. If the travel allowance is reasonable, then you don’t have to include it in your personal income. If it is not reasonable, then it is an income inclusion and you will need to pay tax on it. In terms of what is … Continue reading What amount can I charge to my company in terms of per diem travel expenses?

Do I have to pay tax on a merger between two Canadian companies?

Question: I would like to merge my business with a Canadian company that operates in the same field as me. Is there any way to avoid paying tax on the merger? Answer: The Income Tax Act allows for a tax free merger if the following conditions are met: Both corporations are Canadian Controlled Private Corporations … Continue reading Do I have to pay tax on a merger between two Canadian companies?

What are the tax consequences of changing from a sole proprietorship to a corporation?

Question: I am currently operating as a sole proprietor, but I see the benefits of incorporating my business and wish to do so. However, I have several assets that have appreciated in value (including goodwill) since I began. Is there any way I can transfer these assets tax-free to my corporation?  Answer: When you transfer … Continue reading What are the tax consequences of changing from a sole proprietorship to a corporation?
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