One of my favorite all time moments on Schitts Creek is David “explaining” to his Dad about Write-Offs:

It’s when you buy something for your store and the government pays you back for it…nobody pays for it?! You “write it off”

As Dad so eloquently corrects him, however –

A write off is a business expense, used to reduce your taxable income. You can’t just buy stuff for yourself and write them off!! 

There’s so much confusion and concern about what you can or can’t “write off” that I thought it would be a good idea to put together this list.

1. Stuff you sell

If you have physical products, these will be the obvious things like your raw materials, packaging supplies, tools, etc.  If you use it to make/create your end product, those are DEFINITELY write offs. Thinking about claiming your kids’ craft supplies from Michaels? No dice.  Shipping your Christmas presents – well I actually probably would, cause postage is postage ;).

2. Stuff you need to sell

Think marketing and such.  You’ll have your website, design, printing, subscriptions for services like email/CRM, social media scheduling, etc. PLEASE do not try to claim personal services; getting your nails done, or buying a new outfit is NOT a business expense.  Botox treatments and blowouts – no that doesn’t count either.

Those are the easy ones.  Then we get into the grey area’s where your personal and business lives start to meld…

1. Home office/Studio

Yes you can totally write off these spaces.  You have to be careful with things like working at your kitchen table vs. having a dedicated room/space for your office, but at the end of the day, they’re all legit.  So for your home expenses, you can claim – rent/mortgage interest, property taxes, condo fees, utilities (including internet & home security), and home insurance

Now of course you can’t claim the FULL amount of all those costs, but how do you know how much you can claim?  So the easy way is this: count the number of rooms in your house (count your hallway(s) too), and then count the room(s) you use for your business.  For instance if you have 10 rooms in your house and 1 is for your biz, you have 1/10 or 10% of your house used for your business.  And you guessed it, that means you can claim 10% of your home expenses as your home office.  Generally speaking, you should keep this around 10-15%.  Anything above this and you may get flagged for an audit.

2. Auto

Your vehicle costs works kind of the same.  Regardless whether you have a corporation that owns the vehicle, or if you’re a sole prop / own the vehicle personally, you can only claim (or “write off”) the portion of vehicle expenses that you use for business purposes.

Now the ultra-legit way of doing this is to have some kind of mileage tracker where you allocate every kilometer you drive to either business or personal.  At the end of the year, you get a total of business km’s and personal km’s and, like with your home, you get the percentage and can use that percent of your vehicle costs.

If I just sent you into a tailspin panicking that you didn’t track anything in 2022, its ok.  I have a few things I do to try to come up with the number.  One option is to go through your calendar and use apple maps to figure out a reasonable km count for the year.  Option two – just guess ;) super scientific, I know.  But meh – you know you drove places, so we just need to not get too greedy.  I like to have the business vs personal to be around 25/75…that seems to keep things under the radar.

3. Phone

We run our businesses on our phones so we sure can write off those costs!  It’s generally a good idea to allocate a portion to “personal” but that’s totally up to you.

There it is.  A run-down of what is or isn’t a write off.  The most important thing to remember is that you need to have your receipts.  CRA likes to audit things like home office expenses at the 6-year mark, cause its banking on your throwing things out.  Don’t let them catch you like that! My best advice is to digitize your receipts and save them somewhere on your computer so that if they come knocking, you’re ready for them!

If I’ve freaked you out, email me and I’ll send over my super simple calculator to help you through it all!