Business Travel Expenses – A few things to care about!

Travel Expenses - Canada Business Taxes
A lot of time self employed persons or small businesses ask the questions about deduction of travel expenses. Sometimes, for small businesses in particular, there is a misguided information available for these entrepreneurs or small business owners that they can write-off “all” of their travel expenses.
Yes, travel expenses are deductible but it does not mean that all the vacations, or meals and entertainment on these vacations and trips are all deductible. There are certain limitations and a strict criteria is applicable to these deductions. Though as per Income Tax Act only the business travel carried out for generating profits for the business are deductible but in reality we encounter different situations.

In this post, we are going to comment on travel expenses in general without covering each and every possible scenario. Should you need a tax advise, please contact a reputable corporate tax accountant in Canada and discuss the particular situation.

What type of Travel expenses can be deductible?

Generally speaking below expenses are eligible for deductions:

  • Meals & Entertainment

  • Hotel accommodations

  • Air travel tickets and train tickets

  • Car rentals and Taxi

  • Convention expenses

  • Motor Vehicle usage

Depending on the specific situation, there might be other deductions available too.

What Meals and Entertainment expenses are deductible?

Generally you can claim only up to 50% of meal and entertainment expenses. The purpose of these meal meetings should be primarily business for them to be deductible as business expenses.

When hotel accommodation can be deducted?

Hotel accommodations are usually deductible when there is an overnight stay away from your town, and it is for business purpose. You must differentiate between local business travel from out-of-town business travel other than considering the need and reasonableness of travel.

Bizcation – Can a vacation be combined with Business Trip to write-off travel expenses?

If you are traveling primarily for business and want to have vacation, you might be eligible to deduct airfare & hotel stay. You might also be eligible to deduct meals and entertainment expenses if you accompany your client. Expenses incurred on the personal entertainment and travelling around are not deductible.

Cost of Conventions

If attending conventions related to your profession or business, you can deduct these costs but these costs are limited to two conventions per year. While on these conventions you may be eligible to deduct some meals and entertainment expenses subject to 50% deduction limit.

If the spouse travel expenses can be deducted as Travel Expenses?

If the business requires and request that your spouse travel with you for business purposes, business can deduct those expenses. If it is not required but paid by business, its a taxable benefit from business to employee.

If you are taking your spouse on a business trip and she will be involved in the business activities which are reasonable and necessary, these are deductible. However, if your spouse is not part of your business meetings, conventions, or any other business activity AVOID claiming such a deduction.

If the Kids travelling expenses can be deducted?

You should avoid any kids travelling expenses to be written-off for business purposes. If a business is paying you a vacation for kids, its a taxable benefit at your hand.

Can I deduct my personal travel as business travel and get away with it?

You may get away with it for a while but it is very likely that you are going to catch the attention of CRA, sooner or later. Avoid it in all cases! Even if you are able to manufacture a business reason for such an expense consider the consequences of making false statements, and the legal and accounting costs involved in the process.

Generally, you should claim the expenses which are for business purposes and if they are mixed with personal expenses, allocate a percentage to business.

If you are an incorporated business, consult a corporate tax accountant in Canada and if you are an unincorporated business consult a professional tax preparation services. When in doubt, a lot of resources are available in the form of guides from CRA on the internet or simply give them a call.

Alternatively, you can contact us at Maroof HS Tax Accounting and Business Services inc. We provide both individual tax preparation services and corporate tax services in Canada.

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