Tax Quiz: “Can I claim this?”

Monopoly board with houses on it.

When tax time rolls around, it can be a real hassle for freelancers and small business operators to know what deductions you can claim and what you can’t. Is it a personal expense or is it maybe a business deduction?

So join us for a round of everyone’s favourite tax season game, “Can I Claim This?”

1. My pets

But, I hear you say, research shows that the presence of pets helps reduce stress in the workplace and improves our productivity. So if my workplace is at home, having Fifi nearby should be deductible as a work-related expense? Sorry, but the answer is still no.

However, you can claim expenses if your furry friend works for you. For example, if you’re seeing-impaired and you need a guide dog to help you perform your business activities, the expenses associated with the buying, training and maintaining of the dog can be claimed—but under medical expenses, not as business expenses. This can include such things as the cost of food, grooming and veterinary care for the dog.

Same thing applies with any trained therapy animal. But the key word here is trained. The animal has to be certified and trained as treatment for an illness or condition you’ve been diagnosed for. Having Fifi curled up at your feet doesn’t cut it.

By the way, are chimpanzees capable of taking dictation? Asking for a friend.

2. My home workspace

If you have a home office that you use regularly to conduct your business, you can deduct a wide range of expenses related to your home workspace, from rent and utilities to supplies and repairs. Read our article on home office deductions for a more detailed discussion.

3. My home-based marijuana grow-op

Yes, our society is taking steps toward legalizing marijuana. Yes, medical cannabis is becoming more widely recognized as a legitimate medical treatment for some conditions. And yes, that wicked grow-op you have going on in your basement would count as a home business—if it were legal. But it’s not. Not yet, anyway.

So, no, you can’t deduct your expenses for seeds, fertilizer, tools, lamps and that outrageous electricity bill.

4. My personal vehicle

As we saw earlier, you can claim deductions if you work out of your home, and those deductions extend to your personal vehicle—as long as you’re using it to conduct activities related to your home-based business.

For example, if someone drives their car to and from their regular day job, that’s considered private usage. But if you work out of your home, and you drive your car from your home office to meet with a client or to conduct business, those expenses are deductible.

For business use of a personal vehicle, the expenses you can claim are calculated based on the business portion of the total miles you’ve driven in a tax year (so be sure to keep track of your mileage and log all your business-related driving).

You can claim a percentage of expenses for things like fuel and oil, licensing and registration, repairs, leasing and insurance. Tip: if you buy separate, supplemental auto insurance for business purposes, it’s fully deductible.

5. My insurance

If you run your own small business or have a home office, you can deduct a portion of your homeowner or renter insurance premiums, for instance. You can claim a portion of what you pay annually for your home insurance, based on the percentage of your home that is devoted to your business. This is true for both Canada and the US, although the IRS rules are stricter.

Or even better, you can purchase home-based business insurance, which is entirely separate from your home insurance, and deduct the full cost of that.

6. My travel expenses for business

If you need to travel for business, such as meeting with a client or attending an industry event, you’ll be able to deduct items including flights, hotel rooms and car rentals. And if you plan to mix in some vacation time with your business trip, you can still claim the portions of the trip that are business-related as long as the trip is primarily spent doing business.

7. My morning coffee

We all need our morning coffee to be able to tackle the day’s work, right? So if it’s something we need for work—a necessary expense—it should be deductible, right?

Well, not so fast, you java fiend. It depends on the purpose of your trip to the coffee shop. You can’t claim the cost of buying a cup of coffee to drink at your home office. That’s seen as a personal expense. Likewise, if you grab your laptop and nip round to your local coffee shop to work for the day, your coffee and donuts can’t be claimed as a business expense.

However, if you’re meeting a client or networking at said café, you can claim 50% of the cost as long as you’re doing business or discussing business. Also, if you’re traveling out of town on business, you can write off half of your meal costs—including coffee—while on the road.

8. Snacks while working at home

Similar to coffee, while it might be tempting to think that snacks are a necessary expense, if you stock up on munchies to snack on while you’re working at home, the expense is not deductible (sorry again, grow-op dude).

9. The internet

Well, not the entire internet. But if you work from a home office, you can claim the percentage of your ISP expenses that relate to the business use of your home. This is usually calculated based on the percentage of your home office square-footage relative to the entire square-footage of your home.

You can also claim expenses related to your professional internet presence, such as the costs associated with web page hosting.

10. Business clothes and grooming

It makes sense that if you run your own business, you sometimes need to look your best, especially when you’re meeting in person with clients or attending industry functions. And that can mean spending money from time to time on clothing, makeup, hair-styling and grooming. But unfortunately, none of these costs can be claimed as business expenses.

However, the cost and upkeep of certain kinds of clothing, such as uniforms, can be claimed so long as you’re required to wear them as a condition of your job and the clothes aren’t generally acceptable as everyday wear. This might apply if your work is healthcare-related, for instance.

You can also likely deduct safety clothing that you need for your job, such as hard hats, safety glasses, safety footwear and work gloves.

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Jim Kelly
By Jim Kelly
Disclaimer

The information and tips we’re sharing in this article are meant to be a starting point for your year-end tax prep, so you can be informed and feel confident when working with your accountant. Be sure to check with a tax expert in your country or region for any specific advice you need, as each business (and tax district) is different. As our lawyers would say: “This article is for informational purposes only. It should not be considered legal or financial advice.”