What’s the first thing that comes to mind when you hear Black Friday or Cyber Monday (BFCM)? The designer purse you’ve been eyeing all season? A big screen TV? Toys for the kids to beat the holiday rush? All good thoughts.
But have you ever considered taking your business shopping?
Although retail extravaganzas like Black Friday target consumers, they are also the perfect time for business owners and entrepreneurs to invest in their enterprise – all while generating deductible expenses. Ready to take stock of what you need, research the best deals, and go shopping?
Here are 5 ideas to get the ball rolling.
- BFCM is a great time for business owners to invest in items they need while generating deductible expenses.
- Bigger ticket purchases like computers and office furniture must be written-off over time, not as one lump sum.
- By keeping track of eligible expenses and saving all receipts, you’ll be organized and ready to claim every deduction.
1. A new laptop or phone
Maybe your computer is glitchy, or can’t run the latest software. Your phone is outdated, or your 3-in-1 printer has stopped scanning. There’s no time like the present for an upgrade. Before you pounce on that shiny new piece of hardware, cross-reference your item with the CRA rules to see what kind of a deduction you’re entitled to and whether your purchase qualifies as a current expense (which is written off as a lump sum) or a capital expenditure (written-off over time).
2. Software and subscriptions
Upgrading your software is always a good idea. Is there a subscription you’ve had your eye on that might give your business an edge? Scoring it at a discount becomes extra sweet when you consider that cloud-based software subscriptions like Office 365, QuickBooks, DocuSign and Adobe are 100% tax deductible if they relate to your business. Ditto for online tools, domain names, and hosting services.
3. A new car
Many car companies get in on the BFCM action with promotions like ‘0% down payment, or ‘no payment for 90 days, which can drop sticker prices by thousands. Although cars aren’t a full write-off, you can deduct the business-use portion of related expenses like fuel, maintenance, interest on financing, and lease payments to name a few.
To calculate the business use portion of your car, you must keep track of the kilometres driven for business. This will ensure you use the correct percentage to calculate and deduct your expenses for the year.
4. Upgrading the tools of your trade
This one can be a little tricky. Some purchases can be claimed in one fell swoop — others are seen as capital items and must be deducted over time. Certain tools under $500 can be fully deducted under class 12 but those over $500 will fall under class 8, and be depreciated over time.
TIP: Take a look at the CRA classes of depreciable properties to get an idea of what class your shiny new tool will fall under.
5. Client appreciation gifts
Buying a gift for a child is a joy, but buying a gift for a client is a write-off. What better way to say “thank you for your business” than a thoughtful, fully deductible present (wireless headphones? A gourmet coffee basket?) that no one has to know you scored on sale.
Always make sure your gift is reasonable in nature and proportionate to your revenue.
TIP: While physical items are fully tax-deductible, gift cards and certificates to restaurants or events such as football games or concerts are grouped under the category of meals and entertainment which are only 50% deductible.
3 tips to remember this BFCM
1. Don’t get carried away with spending.
With deals this irresistible, you run the risk of getting carried away. Make sure you’re thoughtful and identify what you need for your business as opposed to what might be nice or fun to have. A little discipline goes a long way. A good question to ask yourself before making a purchase is: “Will this new item generate more income for me?” If not, don’t even add it to the wish list.
2. Keep track of your expenses.
You can’t deduct an expense you can’t prove. That’s why it’s critical to keep each and every receipt, no matter how small as they add up quickly. Use your phone to snap a photo of receipts as soon as you get them with the QuickBooks receipt scanner, the receipt will save to your file and you’ll feel on top of your game!
3. You can’t deduct everything.
It’s always a good idea to check with your TurboTax expert about what’s legitimately tax deductible before making a major purchase. You don’t want any surprises down the road when you file. It’s never wrong to invest in your business if you do it the right way!
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