getsmartfinancialsolutions

Business Expenses Allowed

getsmartfinancialsolutions@gmail.com (Romel Recido) — Sun, 01 Jun 2025 02:42:27 GMT

Is your business expense claim allowed?

From the CRA website:

The following may be considered when determining operating expenses:

Advertising

You can deduct expenses for advertising, including advertising in Canadian newspapers and on Canadian television and radio stations. You can also include any amount you paid as a finder's fee.

To claim the expenses, you must meet certain Canadian content or Canadian ownership requirements. These requirements do not apply if you advertise on foreign websites.

Restrictions apply to the amount of the expense you can deduct for advertising in a periodical:

You can deduct all the expense if your advertising is directed at a Canadian market and the original editorial content in the issue is 80% or more of the issue's total non-advertising content.
You can deduct 50% of the expense if your advertising in a periodical is directed at a Canadian market and the original editorial content in the issue is less than 80% of the issue's total non-advertising content.

You cannot deduct expenses for advertising directed mainly at a Canadian market when you advertise with a foreign broadcaster.

Allowance on eligible capital property

Note

As of January 1, 2017, the eligible capital property (ECP) system was replaced with the new capital cost allowance (CCA) Class 14.1 with transitional rules. For more information, go to Class 14.1 (5%) .

Bad debts

You can generally deduct an amount for a bad debt if:

you had determined that an account receivable is a bad debt in the year
you had already included the receivable in income

Business start-up costs

To deduct a business expense, you need to have carried on the business in the fiscal period in which the expense was incurred. You have to be clear about the date your business started.

Where a taxpayer proposes to undertake a business and makes some initial expenditures with that purpose in mind, it is necessary to establish whether the expenditure preceded the start of the business or whether the business had in fact begun and there were expenses incurred during preliminary steps leading to the start of normal operations.

Consequently, the date when the business can be said to have commenced must be known.

Determining what you can claim as a start-up expense can be difficult. For more information, go to Interpretation Bulletin IT-364, Commencement of Business Operations , or see Guide RC4022, General Information for GST/HST Registrants .

Business tax, fees, licences and dues

You can deduct any annual licence fees and some business taxes you incur to run your business.

You can also deduct annual dues or fees to keep your membership in a trade or commercial association, as well as subscriptions to publications.

You cannot deduct club membership dues (including initiation fees) if the main purpose of the club is dining, recreation or sporting activities.

Delivery, freight and express

You can deduct the cost of delivery, freight and express incurred in the year that relates to your business.

Fuel costs (except for motor vehicles)

You can deduct the cost of fuel (including gasoline, diesel and propane), motor oil and lubricants used in your business.

For information about claiming the fuel used in your motor vehicle, go to Motor vehicle expenses .

The cost of fuel related to business use of workspace in your home has to be claimed as business-use-of-home expenses.

Insurance

You can deduct all ordinary commercial insurance premiums you incur on any buildings, machinery and equipment you use in your business.

The insurance costs related to your motor vehicle have to be claimed as motor vehicle expenses .

The insurance costs related to business use of workspace in your home have to be claimed as business-use-of-home expenses.

In most cases, you cannot deduct your life insurance premiums. However, if you use your life insurance policy as collateral for a loan related to your business, including a fishing business, you may be able to deduct a limited part of the premiums you paid. For more information, go to Interpretation Bulletin IT-309, Premiums on Life Insurance Used as Collateral .

Insurance expenses for fishers

Enter the premiums you paid to insure your fishing boat and equipment.

In most cases, you cannot deduct the amounts you paid to insure personal property such as your home or car. However, if you used the property for personal use and for your fishing business, you can deduct the business part of these costs. For more information, go to Motor vehicle expenses (not including CCA) and Business-use-of-home expenses .

Interest and bank charges

You can deduct interest incurred on money borrowed for business purposes or to acquire property for business purposes. However, there are limits on:

the interest you can deduct on money you borrow to buy a passenger vehicle or a zero-emission passenger vehicle. For more information, go to Motor vehicle expenses .
the amount of interest you can deduct for vacant land. Usually, you can only deduct interest up to the amount of income from the land that remains after you deduct all other expenses. You cannot use any remaining amounts of interest to create or increase a loss, and you cannot deduct them from other sources of income.
the interest you paid on any real estate mortgage you had to earn fishing income. You can deduct the interest, but you cannot deduct the principal part of loan or mortgage payments. Do not deduct interest on money you borrowed for personal purposes or to pay overdue income taxes.

Fees, penalties or bonuses paid for a loan

You can deduct the fee you pay to reduce the interest rate on your loan. You can also deduct any penalty or bonus a financial institution charges you to pay off your loan before it is due. Treat the fee, penalty or bonus as prepaid interest and deduct it over the remaining original term of your loan.

For example, if the term of your loan is five years and in the third year you pay a fee to reduce your interest rate, treat this fee as a prepaid expense and deduct it over the remaining term of the loan. For more information, see Prepaid expenses .

Fees deductible over five years

You can deduct certain fees you incur when you get a loan to buy or improve your business property. These fees include:

application, appraisal, processing and insurance fees
loan guarantee fees
loan brokerage and finder's fees
legal fees related to financing

You deduct these fees over a period of five years, regardless of the term of your loan. Deduct 20% (100% divided by five years equals 20%) in the current tax year and 20% in each of the next four years. The 20% limit is reduced proportionally for fiscal periods of less than 12 months.

However, if you repay the loan before the end of the five-year period, you can deduct the remaining financing fees then. The number of years for which you can deduct these fees is not related to the term of your loan.

Fees deductible in the year incurred

If you incur standby charges, guarantee fees, service fees or any other similar fees, you may be able to deduct them in full in the year you incur them. To do so, they have to relate only to that year. For more information, go to Interpretation Bulletin IT-341, Expenses of Issuing or Selling Shares, Units in a Trust, Interests in a Partnership or Syndicate and Expenses of Borrowing Money .

Interest deductible on property no longer used for business purposes

You may be able to deduct interest expenses for a property you used for business purposes, even if you have stopped using the property for such purposes because you are no longer in business. For more information, go to Income Tax Folio S3-F6-C1, Interest Deductibility .

Interest on loans made against insurance policies

You can deduct interest you paid on a loan made against an insurance policy, as long as the insurer didn't add the interest you paid to the adjusted cost base of the insurance policy. To claim the interest you paid for the year, have the insurer verify the interest before June 16 of the following year on Form T2210, Verification of Policy Loan Interest by the Insurer .

Capitalizing interest

You can choose to capitalize interest on money you borrow either:

to buy depreciable property
to buy a resource property
for exploration and development

When you choose to capitalize interest, add the interest to the cost of the property or exploration and development costs instead of deducting the interest as an expense.

Interest related to workspace in your home

The interest related to business use of workspace in your home has to be claimed as business-use-of-home expenses.

Legal, accounting and other professional fees

You can deduct the fees you incurred for external professional advice or services, including consulting fees.

You can deduct accounting and legal fees you incur to get advice and help with keeping your records. You can also deduct fees you incur for preparing and filing your income tax and GST/HST returns.

You can deduct accounting or legal fees you paid to have an objection or appeal prepared against an assessment for income tax, Canada Pension Plan or Quebec Pension Plan contributions, or employment insurance premiums. However, the full amount of these deductible fees must first be reduced by any reimbursement of these fees that you have received. Enter the difference on line 23200, Other deductions , of your income tax return (line 23200 was line 232 before tax year 2019).

If you received a reimbursement in the tax year, for the types of fees that you deducted in a previous year, report the amount you received on line 13000, Other income , of your income tax return of the current year (line 13000 was line 130 before tax year 2019).

You cannot deduct legal and other fees you incur to buy a capital property, such as a boat or fishing material. Instead, add these fees to the cost of the property. For more information on capital property, go to Claiming capital cost allowance (CCA) .

For more information, go to Interpretation Bulletin IT-99, Legal and Accounting Fees .

Maintenance and repairs

You can deduct the cost of labour and materials for any minor repairs or maintenance done to property you use to earn business income.

However, you cannot deduct any of the following:

the value of your own labour
the costs you incur for repairs that are capital in nature ( capital expense )
the costs you incur for repairs that have been reimbursed by your insurance company

For repairs that are capital in nature, you can claim a capital cost allowance .

You have to claim the maintenance and repairs related to business use of workspace in your home as business-use-of-home expenses.

Note for daycares

You can only deduct maintenance and repair expenses if you can prove that the day to day running of your daycare is what caused any damage and you have not received any compensation or refund from your insurer.

Management and administration fees

You can deduct management and administration fees, including bank charges, incurred to operate your business. Bank charges include those for processing payments.

Do not include:

employees' salaries, wages and benefits (including employer's contributions)
property taxes
rent paid

Instead, report these amounts separately.

Meals and entertainment (allowable part only)

The maximum amount you can claim for food, beverages and entertainment expenses is 50% of the lesser of the following amounts:

the amount you incurred for the expenses
an amount that is reasonable in the circumstances

These limits also apply to the cost of your meals when you travel or go to a convention, conference or similar event. However, special rules can affect your claim for meals in these cases. For more information, see Travel .

These limits do not apply if any of the following apply:

Your business regularly provides food, beverages or entertainment to customers for compensation (for example, a restaurant, hotel or motel).
You bill your client or customer for the meal and entertainment costs, and you show these costs on the bill.
You include the amount of the meal and entertainment expenses in an employee's income or would include them if the employee did not work at a remote or special work location. In addition, the amount cannot be paid or payable for a conference, convention, seminar or similar event and the special work location must be at least 30 kilometres from the closest urban centre with a population of 40,000 or more. For more information about urban centres, go to Statistics Canada's Population and Dwelling Count Highlight Tables .
You incur meal and entertainment expenses for an office party or similar event, and you invite all your employees from a particular location. The limit is six such events per year.
You incur meal and entertainment expenses for a fund-raising event that was mainly for the benefit of a registered charity.
You provide meals to an employee housed at a temporary work camp constructed or installed specifically to provide meals and accommodation to employees working at a construction site (note that the employee cannot be expected to return home daily).

Entertainment expenses include tickets and entrance fees to an entertainment or sporting event, gratuities, cover charges, and room rentals such as hospitality suites. For more information, go to Interpretation Bulletin IT-518, Food, Beverages and Entertainment Expenses .

Meals and entertainment expenses for fishers

Claim the total amount you paid for food you stocked on your boat to feed your crew when you fished offshore.

Often, inshore fishers do not stock food. Instead, they bring meals from home for their crew because the trips are short (leave home early in the morning and come back late in the afternoon). You can deduct the cost of these meals as long as the meals were a taxable benefit to your crew.

In some cases, you can deduct the cost of meals even though they were not taxable benefits. You can do this if your boat was at sea for 36 hours or more and the meals you provided for your crew were not taxable benefits. Also, if you gave meals to your sharespeople, generally the meals you provided for them are not taxable benefits because we do not consider sharespeople to be employees. The 50% rule applies to all self-employed sharespeople. However, they may be limited by the restriction noted above.

For more information about taxable benefits, see the T4130, Employers' Guide – Taxable Benefits and Allowances .

Long-haul truck drivers

Expenses for food and beverages consumed by a long-haul truck driver during an eligible travel period are deductible at 80%.

An eligible travel period is a period of at least 24 continuous hours throughout which the driver is away from the municipality and metropolitan area that he or she resides in (the residential location) and is driving a long-haul truck that transports goods to or from a location that is beyond a radius of at least 160 kilometres from the residential location.

Extra food and beverages consumed by self-employed

This information is for self-employed:

on foot
bicycle couriers
rickshaw drivers

They can deduct the cost of the extra food and beverages they must consume in a normal working day (eight hours) because of the nature of their work.

The daily flat rate that can be claimed is $23.

If you are claiming this deduction you should be prepared to provide logbooks showing the days worked and the hours worked on each of these days during the tax year. The CRA may also ask for dispatch slips or other documents to support the days worked during the tax year.

By using this flat-rate deduction, you will not be required to maintain or submit receipts for the extra meal and beverage consumed.

If you want to claim more than the flat-rate amount, the CRA will also need:

supporting receipts for all food and beverages claimed
something that clearly shows the extra amount of food and beverages required because of the nature of your work, and how this amount exceeds what the average person would consume in terms of both cost and quantity

Office expenses

You can deduct the cost of office expenses. These include small items such as:

pens
pencils
paper clips
stationery
stamps

Office expenses do not include items such as:

calculators
filing cabinets
chairs
desks

These are capital items.

Prepaid expenses

A prepaid expense is an expense you pay ahead of time. Under the accrual method of accounting , claim any expense you prepay in the year or years in which you get the related benefit.

Example

Suppose your fiscal year-end is December 31, 2022. On June 30, 2022, you prepay the rent on your store for a full year (July 1, 2022, to June 30, 2023). You can only deduct one-half of this rent as an expense in 2022. You deduct the other half as an expense in 2023.

Under the cash method of accounting , you can't deduct a prepaid expense amount (other than for inventory) relating to a tax year that is two or more years after the year the expense is paid.

However, you can deduct the part of an amount you paid in a previous year for benefits received in the current tax year. You can deduct these amount as long as you have not previously deducted them.

Example

If you paid $600 for a three-year service contract for office equipment in 2022, you can deduct $400 in 2022. This represents the part of the expense that applies to 2022 and 2023. On your 2024 income tax return, you could then deduct the balance of $200 for the part of the prepaid lease that applies to 2024.

For more information, go to Interpretation Bulletin IT-417, Prepaid Expenses and Deferred Charges .

Property taxes

You can deduct property taxes you incurred for property used in your business. For example, you can deduct property taxes for the land and building where your business is situated.

The property tax related to business use of workspace in your home has to be claimed as business-use-of-home expenses.

Rent

You can deduct rent incurred for property used in your business. For example, you can deduct rent for the land and building where your business is situated.

The rent expense related to business use of workspace in your home has to be claimed as business-use-of-home expenses.

Salaries, wages and benefits (including employer's contributions)

Ask for a CPP/EI ruling on employment status

If you or a person working for you is not sure of the worker's employment status (employee or self-employed), either of you can ask the CRA for a CPP/EI ruling to have the status determined and whether the employment is pensionable, insurable, or both. The ruling can also determine if the earnings are pensionable, insurable, or both. For more information, go to How to get a CPP/EI ruling .

For information on employment status, go to Canada Pension Plan and Employment Insurance Rulings and see Guide RC4110, Employee or Self-Employed?

Amounts you can deduct as an employer

You can deduct gross salaries and other benefits you pay to employees.

Do not include:

salaries and wages such as direct wage costs or subcontracts
drawings of the owners of the business
salaries or drawings of the owners of the business since salaries or drawings paid or payable to you or your partners are not deductible

The Canada Pension Plan is for all workers, including the self-employed. Employers , employees and most self-employed individuals must contribute to the CPP. The CPP can provide basic benefits when you retire or if you become disabled. When you die, the CPP can provide benefits to your surviving spouse or common-law partner and your dependent children under 25. For more information on contribution and benefits, visit Service Canada .

Quebec workers including the self-employed are covered under the Quebec Pension Plan .

As the employer, you can deduct your part of the following amounts payable on employees' remuneration:

CPP or QPP contributions
employment insurance (EI) premiums
Provincial parental insurance plan premiums, which is an income replacement plan for residents of Quebec (visit Revenu Québec for details)
workers' compensation amounts for your employees

You report each salary by the end of February on a T4 slip, Statement of Remuneration Paid, or T4A slip, Statement of Pension, Retirement, Annuity and Other Income.

You can also deduct any premiums you pay for an employee for a sickness, an accident, a disability or an income insurance plan. For more information on these slips, see T4001, Employer's Guide – Payroll Deductions and Remittances , and go to Payroll .

You can deduct the salary you pay to your child, as long as you meet all these conditions:

you pay the salary
the work your child does is necessary for earning business, professional or fishing income
the salary is reasonable when you consider your child's age, and the amount you pay is what you would pay someone else

Keep documents to support the salary you pay your child. If you pay your child by cheque, keep the cancelled cheque. If you pay cash, have the child sign a receipt.

Instead of cash, you can pay your child with a product from your business. When you do this, claim the value of the product as an expense and add to your gross sales an amount equal to the value of the product. Your child has to include the value of the product in his or her income.

You can also deduct the salary you pay to your spouse or common-law partner . When you pay your spouse or common-law partner a salary, use the same rules that apply to paying your child.

Report the salaries you pay to your children and spouse or common-law partner on T4 slips, the same as you would for other employees. However, you cannot claim as an expense the value of board and lodging you provide to your dependent children and your spouse or common-law partner.

For more information, see Guide RC4120, Employers' Guide – Filing the T4 Slip and Summary .

Supplies

You can deduct the cost of items the business used indirectly to provide goods or services (for example, drugs and medication used in a veterinary operation, or cleaning supplies used by a plumber).

Telephone and utilities

You can deduct expenses for telephone and utilities, such as gas, oil, electricity, water and cable, if you incurred the expenses to earn income.

The expenses for utilities that are related to business use of workspace in your home have to be claimed as business-use-of-home expenses.

Travel

You can deduct travel expenses you incur to earn business and professional income. Travel expenses include:

public transportation fares
hotel accommodations
meals

In most cases, the 50% limit applies to the cost of meals, beverages and entertainment when you travel. For more information, see Meals and entertainment (allowable part only) .

The 50% limit also applies to the cost of food and beverages served and entertainment enjoyed when you travel on an airplane, train or bus, when the ticket price does not include such amounts.

Canada's OAS 21 Facts you should know

Sun, 01 Jun 2025 02:42:24 GMT

https://www.msn.com/en-ca/money/other/canada-s-old-age-security-pension-21-facts-you-should-know/ss-BB1oRUv5?ocid=hpmsn&cvid=e5adf2a0230a4f51ab8089b6e8467d7c&ei=17#image=15

CPP Myths that could be sabotaging your retirement plans

getsmartfinancialsolutions@gmail.com (Romel Recido) — Sun, 01 Jun 2025 02:42:22 GMT

12 CPP Myths That Could Be Sabotaging Your Retirement Plans

1. You must take CPP at age 65

While the standard age for starting Canada Pension Plan (CPP) benefits is 65, this isn’t a requirement. You can begin receiving payments as early as 60, though this comes with a permanent reduction of 0.6% per month, totaling up to 36% less at age 60. Conversely, delaying CPP until age 70 results in a 0.7% increase per month, leading to up to 42% more. The ideal time to start depends on factors like health, financial situation, and life expectancy.

2. CPP will provide enough income for retirement

CPP was never designed to be your only source of retirement income. The maximum monthly CPP payment in 2025 is about $1,400, but the average payment is much lower, around $750 per month. Most financial advisors suggest you’ll need 70-80% of your working income during retirement. CPP typically replaces only about 25-33% of pre-retirement earnings, so additional savings through RRSPs, TFSAs, and other investments are essential.

3. You need to stop working to collect CPP

Many Canadians believe they must fully retire before collecting CPP benefits. This is not true. You can continue working full time or part time while receiving CPP payments. However, if you’re under 65 and still working while collecting CPP, you and your employer must continue making CPP contributions. These additional contributions will increase your benefits through the Post-Retirement Benefit, giving you more income in later years.

4. CPP funds might run out before you retire

The CPP fund is stable and expected to remain sustainable for at least 75 years . The CPP Investment Board professionally manages the fund, which was valued at over $570 billion as of 2025. The fund is regularly reviewed by Canada’s Chief Actuary to ensure it remains solvent. CPP contributions were increased slightly between 2019 and 2023 specifically to strengthen the plan’s long term stability.

5. You can't collect CPP if you live outside Canada

CPP benefits can be paid to eligible recipients anywhere in the world. If you’ve contributed to CPP and qualify for benefits, you can receive them regardless of where you live during retirement. The payments can be deposited directly into a Canadian bank account or, in many cases, into a foreign bank account. However, non residents may be subject to a 25% withholding tax, though this can be reduced by tax treaties between Canada and your country of residence.

6. CPP benefits are the same for everyone

CPP payments vary widely based on how much and how long you contributed to the plan. Your benefit amount depends on your average earnings throughout your working life, the number of years you contributed, and at what age you start collecting benefits. The CPP calculation uses your best 40 years of earnings up to age 70. Taking time off work, working part time, or having years of lower income will reduce your CPP benefits unless you use provisions like the child-rearing dropout provision.

7. You should always take CPP early

While some financial advisors encourage taking Canada Pension Plan (CPP) benefits early at 60 to access funds sooner, this isn’t always the best move. Waiting until 65 typically results in higher total benefits if you live past 74, and delaying until 70 provides the greatest lifetime payout for those reaching their 80s. The best decision depends on individual factors such as health, longevity, financial needs, and other income sources.

8. CPP survivor benefits replace the deceased's full pension

CPP survivor benefits do not provide the deceased’s full pension to the surviving spouse. Instead, a formula determines the amount, combining the survivor benefit with the recipient’s own CPP entitlement while capping the total at the maximum allowable CPP payment. If the survivor already receives the maximum CPP benefit, they may get little to no extra compensation from the survivor benefit.

9. You can't increase your CPP after you've started collecting it

Even after you start receiving CPP, you can still grow your benefits by continuing to work. Between ages 60 and 70, both you and your employer must contribute to CPP if you’re employed while collecting payments. These contributions go toward a separate benefit known as the Post-Retirement Benefit, which is added to your regular CPP income. Each year of contributions results in a small, permanent boost to your monthly payment.

10. RRSP withdrawals affect your CPP benefits

CPP benefits are based solely on your contributions to the CPP program during your working years and are not affected by your RRSP withdrawals or other retirement income. However, RRSP withdrawals are considered taxable income and may push you into a higher tax bracket. This could potentially affect the amount of OAS benefits you receive if your income exceeds the threshold for the OAS clawback, which begins around $86,000 in 2025.

11. You can't work past 65 and increase your CPP

Working beyond age 65, even to age 70, can significantly boost your CPP benefits. Each month you delay taking CPP after 65 increases your payment by 0.7%. Additionally, if you continue working and making CPP contributions during these years, you can replace lower earning years in your contribution history with these higher earning years. This “drop-in” effect can substantially increase your pension, especially if you had years with lower income or gaps in your work history.

12. Self-employed people pay double CPP contributions for no extra benefit

Self-employed Canadians do pay both the employee and employer portions of CPP contributions , which is double what employees pay. However, this doesn’t mean they’re getting poor value. These contributions generate exactly the same CPP benefits as someone who is employed with the employer making half the contribution. The tax system recognizes this burden, allowing self-employed people to deduct the employer portion of CPP contributions from their income, reducing their overall tax bill.

Income Tax Filing Tips for Online Businesses

getsmartfinancialsolutions@gmail.com (Romel Recido) — Fri, 01 Dec 2023 16:50:44 GMT

Income Tax Filing Tips for Online Businesses

If you earn money online, either as your full-time income, part-time income or occasional income, the Canada Revenue Agency (CRA) requires you to report your earnings at tax time.

At GetSmart, we want you to stay out of tax trouble, so we’re going to teach, educate or enlighten you as to how to correctly complete your personal income tax return and understand the deductions you are eligible for.

Earning Internet Income

According to the CRA, you must report Internet business activities on your income tax return. This broad term includes a wide range of earnings and activities, however year-over-year, as more-and-more Canadians earn income online, the CRA narrows the scope and gets more detailed regarding the tax filing requirements and obligations.

If you write a blog, have a successful YouTube channel, or a lot of followers on Instagram and earn money from advertisements, this is considered income from an Internet business. Similarly, if you design web pages, sell items on Ebay for profit, or are paid to “click” or share Web pages, you also fall into this category.

Essentially, if you provide information, products or services online and earn income from it, the CRA requires you to report it on your income tax return. Reporting requirements can vary based on the structure of your business.

Your Business Structure

When you earn money from an employer, you are considered an employee. In contrast, anytime you earn money on your own, the CRA considers you a business owner.

This business can take a number of forms. For example, you may be self-employed or part of a partnership. Alternatively, you may opt to turn your business into a corporation. In all cases, the CRA requires you to report your earnings but also allows you to deduct business expenses on your income tax return.

Internet Business Income

Your Internet business income consists of all income you receive from doing business online. For example, if you sell items on Ebay, you need to report all of the payments you receive from your buyers. Similarly, if you receive money from any other sources, you also have to report this as income.

If you do a significant amount of online contracting for a single company or payer, this company may send you a T4A form detailing the amounts you have received.

To make completing your income tax return as easy as possible, make sure to save records of all of the income you receive throughout the year.

Possible Deductions:

As a small business owner, you are allowed the deduct the expenses that you incur to earn your income.

These expenses include advertising and office supplies, computers or other electronics you use for your business, the cost of your Internet service, and even expenses related to your vehicle or home office.

In most cases, when you incur an expenses for your Internet business, you can claim their entire value as a deduction against your business income. For example, if you buy an old computer and parts for $100, fix them and then sell them on Ebay for $200, you have to report $200 as income. But you can claim the $100 as an expense.

However, in situations when you make a significant purchase for your business, the CRA requires you to write it off slowly over a number of years. For example, if you buy a warehouse to store items you sell, you can only write off a portion of the expense each year you have the warehouse.

To determine how to write off large purchases, you need to first determine the Capital Cost Allowance (CCA) class and rate of the asset that you have purchased.

Personal and Business Expenses:

If you use something for both personal and business use, you can only deduct a portion of the expense on your income tax return.

For example, if you purchase a new tablet to use for your Internet business, but you also plan to use it for fun. If you use it 30 percent of the time for business, you can claim 30 percent of its cost as a business expense.

This rule applies to a variety of expenses including computers, your Internet service and your car. However, there are special rules for claiming your home office as a business expense.

Home Office Deductions:

To deduct business-use-of-home expenses, your home office must be your principal place of business or you must only use the space for business and regularly meet clients there.

If you qualify for this deduction and your office fills up ten percent of your home’s space, you can claim ten percent of your home’s mortgage, rent, utilities and insurance payments as a business expense. If your office takes up a different amount of space, adjust the numbers accordingly.

Keep records and receipts of all of your expenses — you will need them when you file your income tax return.

Completing Your Self-Employed Income Tax Return:

If you are self-employed, you need to complete Form T2125, Statement of Business and Professional Activities . This form has sections to record your income, deductions and Capital Cost Allowances. It also has a special section devoted to Internet business activities.

Ensure that you note your relevant website addresses in this section and the percentage of your total income generated from the Internet.

Completing Your Income Tax Return for Partners:

If you are part of a partnership, you should also complete T5013 Statement of Partnership Income . This form has special lines for partners and requests information on which percentage of the partnership you own.

You can create a partnership with a written contract or a verbal one, and can split ownership as you like. If you own 30% of the company and your partner owns 70%, you should report 30% of the income and claim 30% of the expenses, and he should claim the other 70%.

Completing Your Corporate Income Tax Return:

If your Internet business is a corporation, you need to complete Schedule 88, Business Internet Activities and submit it along with corporation income tax return (T2).

Building Your Credit

getsmartfinancialsolutions@gmail.com (Romel Recido) — Mon, 16 Sep 2019 15:02:07 GMT

How to build your personal credit

Establishing a positive credit history now can be beneficial down the road when you want to qualify for an auto loan or a mortgage. This may be especially true if you’re new to Canada, or if you’re a recent college grad and are thinking about big purchases. Here are 5 tips on how to build credit.

Start Slow
Good credit takes time to build. Overdoing it at first by applying for numerous credit cards all at once might damage your credit scores right from the start. Applying for credit cards, bank loans or a new mobile phone account will all produce hard inquiries. A lot of hard credit inquiries indicate that you may be taking on too much debt and will have a lot of repayment responsibility and risk. Instead, apply for just one manageable card.

Get a Student Credit Card
Many financial institutions offer credit cards designed especially for students, which are ideal for teaching financial responsibility. These cards tend to have lower credit limits and may even start off with lower introductory interest rates. Reward points may also be part of the deal so you can earn as you spend. These cards may include perks like cash back or money off purchases like entertainment or food. You may also be able to set up text or email alerts informing you of your balance or that your upcoming bill is due.

Secured Credit Card
A secured credit card is an effective way to build credit if you are unable to qualify for a regular credit card or a student card. Secured cards require a deposit with the lender. The amount of money that you put down becomes the credit line for the account, so if you deposit $500, your credit limit for your card will also be $500. Bills are paid monthly, just like with an unsecured card. If you default on your payments, the lender will use your security deposit to pay off your balance. The bank will usually release the security deposit after a period of time if you’ve paid your bill on time and have shown that you’re financially responsible.

Keep Balances Low
Maxing out your credit cards can negatively affect your credit scores. Light use of your cards is best. The less you charge, the better. The balance shown on your credit report — which is usually the balance of your last statement — affects your overall score, so maintaining a lower balance can help you build credit.

Pay on Time
Your payment history is one of the most influential factors when it comes to creating a positive financial history. Making credit card payments on time is crucial to building credit, but don’t forget your other bills. It’s just as important to make sure all your monthly bills are paid within 30 days of their due dates, such as electric, cable and phone bills. Defaulted bills and those that have been sent to collections can remain on your credit report for up to seven years.

Credit to: https://www.transunion.ca/build-credit

Understanding Tax Laws

getsmartfinancialsolutions@gmail.com (Romel Recido) — Mon, 16 Sep 2019 14:56:57 GMT

Why is it important to understand tax laws?

Tax law helps to reduce errors when filing taxes. This is because they are deterring what is taxed, how it's taxed, and to what extent it is taxed. Security. One of the most important parts of tax laws are that they provide businesses and individuals with a sense of security, especially when planning an annual budget.

Taxation refers to the practice of a government collecting money from its citizens to pay for public services. Taxation is the practice of collecting taxes (money) from citizens based on their earnings and property.

Setting Up Your Business

getsmartfinancialsolutions@gmail.com (Romel Recido) — Mon, 16 Sep 2019 14:54:56 GMT

Starting a Business in Canada Step by Step

Starting a business in Canada may seem overwhelming at first. There are quite a few steps to the process, so it helps to take it step by step. This guide is designed to help you make your dream of becoming an entrepreneur a reality.

Each step of this guide links to detailed information that will go into greater detail. The steps are roughly in order, but there is some flexibility. It really doesn't matter if you complete step three, for instance, before you complete step two.

1. Come Up With a Good Business Idea

It doesn't matter whether you're in Canada or anywhere else—a successful business starts with a good idea . Study your skills, watch current trends, and look for ways to improve upon existing concepts or contribute something new to the market. And test your idea thoroughly before you invest serious time and money into it.

2. Write a Business Plan

The best way to test your idea is by turning it into a business plan . This will allow you to thoroughly examine everything about the industry, products, and market for your business. It will also give you something to present to investors and lenders—the ultimate testing ground for your business idea.

Before you launch your business, you should have a thorough, complete business plan to guide you. Early in the process, though, it's possible to put together a quick-start plan that will show you whether your business idea is viable.

3. Choose a Winning Name for Your Business

Choosing a business name comes with both legal and marketing considerations. In Canada, the government places more name restrictions on corporations than on sole proprietorships, but every business owner will have to consider legal issues when naming their business. Most businesses will at least have to register their name with the Canadian government. In terms of marketing , your business name should communicate what the business does in a way that's visually interesting, memorable, and positive.1

4. Choose a Form of Business Ownership

When starting a business in Canada, there are only three basic forms of business ownership that you can choose from for a business structure : the sole proprietorship, the partnership, and the corporation. There are a few options within those, such as a cooperative corporation or the limited partnership , but they all fall under these three umbrellas. Deciding which structure is right for your business will depend on several factors, from your comfort level with liability to the tax deductions you want for your business.23

5. Find Small Business Financing

While some owners can finance their new small businesses out of their own pockets, many others need an infusion of funds from other sources to get off the ground. There are many options to consider, from debt financing to sharing equity to government grants . Understand the differences between each kind of financing, and be sure you're prepared to deal with the obligations of whichever ones you choose.

6. Get a Business License

While not necessary for all businesses, many new businesses will need to get business licenses before they can operate legally within their municipalities. If your city or town doesn't have a website, you can find contact information for government agencies online.

Depending on what kind of business you're starting, you may also need other licenses and permits. Industry Canada's BizPaL is a useful tool for finding out what permits and licenses you'll need to do business. Available in most provinces and territories, BizPaL will provide a personalized list of the business documents you need for all levels of government.

7. Register for the GST/HST

In most cases, unless your new small business's gross income stays under $30,000 for four consecutive quarters, you will have to register for the goods and services tax (GST) and harmonized sales tax (HST). That threshold for the small supplier exemption doesn't apply to all businesses, either. Taxi and limousine services, for instance, always have to register for GST/HST.45

Even if you're not making much money to start, you may want to register for GST/HST immediately because of Input Tax Credits , which are basically your way of getting back the GST/HST your business has paid out on purchases for business use.

8. Register for Provincial Sales Tax (If Needed)

Some provinces have not harmonized their sales taxes with the federal GST, and in those provinces, you will also have to register to collect and remit the appropriate provincial tax. If you are starting a business in Alberta, British Columbia, Manitoba, or Saskatchewan, you will need to register as a collector of provincial sales tax (PST). In Quebec, you will need to register for Quebec Sales Tax (QST).

9. Prepare to Have Employees

When you're starting a business, hiring employees may be the furthest thing from your mind. But it's amazing how quickly that time can come. Prepare ahead for everything you'll need to set up to ensure you're legally covered to hire employees in Canada . This includes handling payroll deductions , worker's compensation insurance, and employment insurance.

10. Buy Additional Business Insurance

Beyond the legally required employment insurance, your business may need additional protection. There are a variety of policies covering property, general liability, business interruption, key people, and disability. Be sure you discuss these options with an insurance agent and lawyer to determine which ones suit your business.

11. Set Your Records Straight Early

If you keep good records from the first moment you open your business, things such as accounting and paying taxes become much easier. Start by opening a separate business bank account and keeping and organizing your business receipts . Using a basic accounting software will help you stay organized early and scale your business as it grows.

12. Market Your Business

After all the work you've put into organizing and launching your business, don't forget one of the most important steps: promoting your business. You should have already planned your marketing strategy when you made your business plan, but now is the time to put it into action. Start translating those plans into goals and specific marketing initiatives so you can get your business off to a great start.

Sources: https://www.thebalancesmb.com/steps-to-starting-a-business-in-canada-2947257

What to do with Dividends?

getsmartfinancialsolutions@gmail.com (Romel Recido) — Mon, 16 Sep 2019 14:49:39 GMT

What is a dividend?

A dividend is a payment (share of profits) made to you from the company just for being a shareholder. For example if a company is paying a dividend of $1/share, and you own 1000 shares, you will receive $1000 every year for as long as you own those shares and as long as the company continues to pay the $1/share dividend. You can choose to save your dividends, spend them, or re-invest them into more dividend-paying stocks.

When it comes to investing there are three ways to make money:

Buying low and selling high:

You are only hoping for the stock price to go up. You are not earning any money while you hold on to a stock that doesn't pay dividends.

Dividend stocks:

This is better because you get paid while you are the owner of a dividend-paying stock. But if the dividend does not increase over time, the amount of money you can make is limited.

Increasing dividends:

This is the best option, you should invest in companies that increase their dividend each year regardless of the stock price. A growing dividend equals more money in your pocket.

6 Tips for DRIP (Dividend Reinvestment Plans) Investors:

Dividend Reinvestment Plans (DRIPs) are an appealing way to put your financial future on auto-pilot.

Anything you can do to take emotions out of financial decisions is often a very good thing, and DRIPs can certainly help.

However, as with most things in the world of finance, the devil is in the details.

Let’s look at six specific tips that DRIP investors need to keep in mind to best maximize the chances of meeting their long-term financial goals.

Tip 1: Selecting the Right Kind of Stock to DRIP

The best thing about DRIP investing is that it’s a powerful tool that helps you to automate investing. Since the wealth and income compounding power of the stock market requires time and patience, DRIP investing can be thought of as the lazy (but smart) person’s road to riches.

DRIP investing is very much a hands-off approach, so it is best used for stocks that are of such high quality and low risk that you don’t need to pay all that much attention to them.

In other words, DRIP investing is best done with blue chip dividend stocks, those companies with predictable businesses and durable competitive advantages that have proven themselves to be excellent wealth compounders over time.

Popular places to start one’s search for these types of DRIP-friendly companies are the lists of dividend achievers (10+ consecutive years of dividend increases) dividend aristocrats (S&P 500 companies with 25+ consecutive years of rising dividends), and dividend kings (50+ consecutive years of dividend increases).

The key to these DRIP candidates is that most of these businesses have proven themselves over decades. Each has steady cash flows to support growing dividends and a shareholder-friendly corporate culture that is dedicated to rewarding investors for their patience over time – no matter what the economy or stock market is doing in the short-term.

With a diversified portfolio in place, you can feel comfortable reinvesting dividends back into these high quality businesses.

Tip 2: Maximizing the Tax Efficiency of DRIP Investing

DRIP investing won’t work if you don’t give your investments the time needed for the compounding power of rising dividend streams to work. That means you should only ever DRIP on shares owned in a long-term portfolio.

And keep in mind that you will have to pay taxes on DRIPed dividends. For most stocks (basic corporations) that means qualified dividends, which are taxed at the capital gains rate (0%, 15%, or 20%).

Owning these stocks in a tax-deferred account, such as an IRA or 401(k), can be an ideal solution to avoid these taxes until you start withdrawing required minimum distributions at the age of 70.5.

Also keep in mind that owning dividend stocks on a DRIP plan can be a great way to match up your time horizons. After all, any money saved in an IRA or 401(k) can’t be removed without paying hefty fines until the age of 59.5. This can help you keep your eye on the prize and maintain your long-term discipline.

However, when it comes to pass-through stocks such as REITs and MLPs, things can get a bit more complicated.

Tip 3: Making the Most of DRIPs

There are two major benefits that DRIP investing can give you and that investors need to make the most of.

First is the power of exponentially growing dividends to help you achieve strong long-term returns. For example, let’s consider Realty Income (O), which is one of the best high yield monthly dividend stocks.

Since its IPO, Realty Income has been growing its dividend by 4.7% per year, a rate which the company’s long growth runway should allow it to continue for the foreseeable future.

However, while the stock's relatively high yield near 5% is what initially attracts income investors to the stock, the true power of this dividend growth legend comes to those that hold for the long-term.

In fact, if you had bought Realty Income at the IPO, and never sold it, then your yield on cost (current dividend/cost basis) would exceed 30%.

Meanwhile, if you had set up a DRIP to accumulate additional shares over time, then the dividend stream you would now enjoy would be enough to cover your initial investment more than fivefold, every single year.

DRIP investing, with its emphasis on the long term, is a reasonable way to keep your focus on the horizon and avoid the temptation to time the market or let short-term volatility scare you out of an excellent investment.

The second big benefit to DRIP investing is that some stocks will actually allow you to buy discounted shares.

For example, Enterprise Products Partners (EPD), one of the best midstream pipeline MLPs, offers up to a 5% discount on its units for DRIP participants.

That is the equivalent of 5% free money, in the form of a growing number of units, each which has a growing income stream that can enhance your total returns over time.

Tip 4: Setting Up the Most Cost Effective Drips

There are two main ways to set up a DRIP, through your broker or individually by company through a transfer agent such as Computershare , which many businesses use for DRIP programs.

However, the downside to such an approach is that you can get hit by fees, both onetime and ongoing.

For example, as you can see below, using Computershare to set up a DRIP with Johnson & Johnson (J&J) involves numerous fees, including a very steep commission to sell your shares, $25 plus 12 cents per share.

Tip 5: DRIPing is Great, but There are Downsides

DRIP plans are essentially a way to automatically dollar cost average, meaning to invest a particular sum into a stock on a set schedule regardless of price.

While DRIPs are a great choice for most investors, if for no other reason than it continuously puts your capital to work in the market, that doesn’t mean they are necessarily an optimal means of investing.

That’s because valuation matters, and even high-quality blue chip dividend growth stocks can run up and become overheated. Blindly DRIPing every stock virtually guarantees you will be purchasing some shares of overvalued companies, which increases risk of underperformance.

Identifying fairly priced or even undervalued holdings to reinvest the dividends into instead would improve your portfolio’s long-term returns.

Of course, most people don’t have a portfolio so large that any individual holding, especially one with a relatively low yield, would generate enough dividends each quarter to make such a targeted approach practical.

Instead, you would need to pool your dividends for a time (say a month or a quarter) and then redeploy that cash into whatever appears to be the most undervalued at the time.

Investors pursuing such a strategy need to keep commission fees in mind, which is why such an approach will only work with a very low cost discount broker such as Robinhood (which offers unlimited commission free trades).

In addition, this optimal value dividend growth approach also requires investors to put in the time and energy to track individual companies and select which are the most undervalued, something most people are simply too busy to do.

Despite the allure of manually redirecting capital to the highest potential opportunities within my portfolio, my personal preference is to automatically reinvest dividends. It speeds up compounding, helps resist the temptation to time the market, and keeps a portfolio reasonably diversified over time.

It is also surprisingly hard to know which of your holdings will go on to be the best long-term performers, further raising the challenge of deciding where to actively reinvest dividends. I prefer to maintain an equally-weighted portfolio for that reason as well – if nothing else, it protects me from myself!

Tip 6: Remember the Most Important Rule of DRIP Investing

As you can see below, from 1996 through 2015 stocks returned 8.19% per year, yet the average investor woefully underperformed with an annual return of just 2.11%.

In today’s age of ever more popular and low-cost exchange traded funds (ETFs), what explains the fact that most people’s portfolios haven’t even kept up with inflation?

The answer is that, even in today’s golden age of high-quality market data, human nature is still getting the better of us. Emotions are causing most people to overtrade, including with low-cost ETFs that track the broader market.

This is understandable because over the last few decades psychologists have found that humans brains are naturally hardwired to feel the pain of losing $1 twice as much as the pleasure of gaining a $1 (an evolutionary benefit that is now working against us in investing).

As a result, people naturally attempt to minimize losses and essentially attempt to time the market. However, market timing is the best way to ensure you waste the market’s compounding power.

Since DRIP investing is merely an automation tool that you generally set up through your broker, it can’t save you from yourself if you intentionally sabotage your results through market timing and overtrading.

In other words, DRIP investing only works over the long term, which is why, as with dividend growth investing in general, what matters isn’t market timing but time in the market.

DRIPs Can Be a Dividend Investor’s Best Friend…If Done Right

Today is a true golden age for retail investors because there has never been an easier or more cost effective way for people to save and grow their wealth and income over time.

That’s due to the plethora of quality research tools, low-cost brokers, and ways of automating one’s long-term investment strategy. However, at the end of the day DRIP investing is just a tool and not a guaranteed way to riches or success.

Like with all tools, what matters most is the person wielding it, which means learning to become disciplined and patient enough to allow the compounding power of the market to work for you.

That being said, if you can create a long-term investing plan that suits your needs, risk profile, and time horizon, and most importantly, stick to it in good times and bad, then DRIP investing can be one of the best ways to reach your financial goals.

Source: https://www.simplysafedividends.com/intelligent-income/posts/27-6-tips-for-drip-investors

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Business Expenses Allowed

Is your business expense claim allowed? ﻿

Canada's OAS 21 Facts you should know

https://www.msn.com/en-ca/money/other/canada-s-old-age-security-pension-21-facts-you-should-know/ss-BB1oRUv5?ocid=hpmsn&cvid=e5adf2a0230a4f51ab8089b6e8467d7c&ei=17#image=15

CPP Myths that could be sabotaging your retirement plans

12 CPP Myths That Could Be Sabotaging Your Retirement Plans

Income Tax Filing Tips for Online Businesses

Income Tax Filing Tips for Online Businesses

Building Your Credit

How to build your personal credit

Understanding Tax Laws

Why is it important to understand tax laws?

Setting Up Your Business

Starting a Business in Canada Step by Step

1. Come Up With a Good Business Idea

2. Write a Business Plan

3. Choose a Winning Name for Your Business

4. Choose a Form of Business Ownership

5. Find Small Business Financing

6. Get a Business License

7. Register for the GST/HST

8. Register for Provincial Sales Tax (If Needed)

9. Prepare to Have Employees

10. Buy Additional Business Insurance

11. Set Your Records Straight Early

12. Market Your Business

What to do with Dividends?

What is a dividend?

6 Tips for DRIP (Dividend Reinvestment Plans) Investors:

Tip 1: Selecting the Right Kind of Stock to DRIP

Tip 2: Maximizing the Tax Efficiency of DRIP Investing

Tip 3: Making the Most of DRIPs

Tip 4: Setting Up the Most Cost Effective Drips

﻿

Tip 5: DRIPing is Great, but There are Downsides

Tip 6: Remember the Most Important Rule of DRIP Investing

DRIPs Can Be a Dividend Investor’s Best Friend…If Done Right

Is your business expense claim allowed?