When starting up a business there are many things to bear in mind. One very important area of consideration is to ensure that you deduct start up expenses properly, to avoid unforeseen charges coming your way, and to make life a whole lot easier too.  

The CRA lets you deduct your initial start up business costs as business expenses, but you need to be sure that you are actually deducting the right things. This whole subject can be very confusing for a new business owner, and in that case it is vital that you get up to date and accurate advice from a skilled and registered accountant. These start up expenses also need to be incurred in the days after your business is registered and begins, otherwise they don’t fall into this deductible category.  

What Are Start up Costs?

These are the costs which are incurred to get your business started. So, if you’re running a bricks and mortar store, you would use the initial month’s rent, signs, displays, etc as your start up costs. If you’re going to be working as a freelancer, you would use a computer, desk, etc as your start up costs. In order for these to be classed as start up costs by the CRA you need to make the purchases (or incur the costs) during the first period of your business working, e.g. it can’t be purchased beforehand. In addition, these costs need to pertain to day one of your business starting.

The CRA states that business commitment date is when a business owner makes solid steps towards marketing their business, e.g. goods and services. If you purchase the item you want to use as a start up cost before the business commencement date, you may still be able to use deduct it as a start up cost, but it has to be a specific business-only product and you will need to get solid advice from an accountant on whether that item is applicable.  

How to Deduct Start up Costs

In order to deduct your start up costs you will need to file your first tax return. You can do this yourself or you can hire an accountant to do it for you; it’s a personal choice but expert advice is always something you should utilize when it is available!

You will fill out the T2125 form in order to file your return, which will cover your expenses and your income, and you will enter your start up costs on this form. This form is then submitted alongside another tax return, i.e your federal income tax.

To reiterate, it’s far better for a small business to seek up to date and professional advice from an accountant, than to try and do it alone and make a mistake. There are constantly shifting and changing rules in place when it comes to taxes and deductions, and in order to work within current rules, and accountant is the way to go.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team