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Self-employed individuals and corporations, business and trip expenses

Deduct Your Travel Expenses


By —— Bio and Archives--June 28, 2009

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When it comes to deducting travel expenses, make sure you understand all of the rules before you even begin the process.

According to Chartered Accountant Nathan Choran, Goldfarb, Shulman, Patel & Co. LLP in Concord, Canada Revenue Agency (CRA) has very specific regulations about what can and cannot be deducted.

“The general rule for self-employed individuals and corporations is that travel expenses are deductible as long they are incurred for business purposes.”

“While travel expenses are usually equated with business or employment, another key area that should not be overlooked is medical travel,” explains Chartered Accountant Ron McFadyen, McFadyen Consulting, in Niagara on the Lake. 

“If medical care is not available nearby, then your travel expenses may qualify as medical expenses for the tax credit, saving you potentially significant costs.”

Business Travel Expenses

Choran explains that, while the CRA does not limit the amount of travel that is deductible, it is subject to the general principle for all business expenses that they be reasonable in the circumstances. “Therefore, avoid being extravagant on business trips, if you want greater certainty that your business travel will be tax deductible, if audited.”

Avoid claiming personal travel expenses. If you are audited by the CRA, the claim will not only be denied, but if you are a shareholder of a corporation making the claim, you may also be personally assessed with a taxable benefit for the cost of the travel.

What can you claim?

Deductible business travel expenses involve vehicle expenses, as well as lodging, meals and entertainment expenses. For tax purposes, only 50 per cent of meals and entertainment can be deducted. Where convention meals are concerned, they have a deemed cost of $50 per day for tax purposes, unless they are billed separately by the organizer. 

There are some exceptions to the 50 per cent limitation on meals and entertainment.  For example, if you are travelling on an airplane, train or bus - any meal and drink costs incurred, whether as part of the ticket price or otherwise, are fully deductible.

For employees, vehicle expenses are potentially deductible if the employee is required to work away from their employer’s place of business or in different places, and the employment contract requires them to pay for such travel costs or motor vehicle expenses. Deductible vehicle expenses include fuel and oil, maintenance and repairs, insurance, licence and registration fees, as well as certain other costs.

If an employer provides an allowance to an employee for business travel while using their own vehicle, the maximum amount deductible for 2009 by the employer is 52 cents for the first 5,000 kilometres driven by the individual on business, and 46 cents per kilometre thereafter.

Medical Travel Expenses

“Make sure you keep detailed records,” continues McFadyen, “because once again the rules are complicated.

“CRA stipulates that it must be necessary for you to travel away from your community to obtain the medical treatment – similar services cannot be available locally.”

Your travel must also meet two distance thresholds. To deduct vehicle expenses or alternate transportation costs (bus, train or plane) you must be required to travel at least 40 kilometres one way to seek medical services. And if you are required to travel at least 80 kilometres one way, then you can also deduct your accommodation, parking and meals.  

Generally, meals and accommodation are restricted to the patient. However, if you are accompanying the patient, you may be able to write off your meal and accommodation expenses as well. To qualify, a doctor must certify that an attendant is necessary.
 
To claim medical expenses, you must retain your receipts for each expense. If you do not have receipts, then you can follow the allowable flat-rate amounts prescribed by CRA. Currently, the flat rate travel allowance is 55.5 cents per kilometre travelled and $17 per meal, or $51 per day.

Both Choran and McFadyen agree: it’s wise to know the rules and seek professional advice from a Chartered Accountant to avoid problems at tax time.



Inst. of Chartered Accountants -- Bio and Archives | Comments

The Institute of Chartered Accountants of Ontario is the qualifying and regulatory body of Ontario’s 33,000 Chartered Accountants and 5,000 CA students. Since 1879, the Institute has protected the public interest through the CA profession’s high standards of qualification and the enforcement of its rules of professional conduct. The Institute works in partnership with the other provincial Institutes of Chartered Accountants and the Canadian Institute of Chartered Accountants to provide national standards and programs that are used as examples around the world. </em>

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