# Expenses



## kid5022 (Nov 14, 2010)

Hi everyone,

just got a quick question, i work and also I freelance in designing websites/graphics. I earn income from my designing, which I have to report. Just want to ask can I claim my expenses as well? New computer, computer software etc.

If i could, can i claim it as self employed or as biz income?

Thanks guys.


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## MrBurns (Sep 12, 2010)

To claim business expense you have to have a registered business I assume.


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## kid5022 (Nov 14, 2010)

MrBurns said:


> To claim business expense you have to have a registered business I assume.


I actually claim it as self employed on turbotxx but since i am no professional, it actually tell me its biz income. So i guess self proprietor?


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## Homerhomer (Oct 18, 2010)

MrBurns said:


> To claim business expense you have to have a registered business I assume.


If one is under $30k in revenues then you don't have to register and don't need to have business number or gst number, even though it is beneficial to do so.


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## Homerhomer (Oct 18, 2010)

kid5022 said:


> I actually claim it as *self employed* on turbotxx but since i am no professional, it actually tell me its *biz income.* So i guess *self proprietor?[/*QUOTE]
> 
> Sole proprietor, self employed, buziness income are exactly the same things for the purpose of filing your personal taxes.


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## mind_business (Sep 24, 2011)

If you are claiming these items as a business expense, and haven't looked into this already, you should familiarize yourself with CRA's rules on CCA (Capital Cost Allowance). Basically you cannot claim the full cost of the item in any given year (with some exceptions). You need to figure out your CCA based on the 'Class' of the item. Take a look at this link:

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/cptl/dprcbl-eng.html

As you can see, computers fall into Class #10 which sets the depreciation rate at 30% ... which is the amount you can claim in a year. [Example: Initial Purchase price = $1000. Year 1 deduction = $300; Year 2 deduction = $210; Year 3 deduction = $147 ... and so forth.

If you purchase the item partway through the year, then the first year you start claiming the item is reduced by the rules defined by CRA. 

Software, other than the 'System' software, falls under Class #12 or 100% depreciation.

Note - I am not a Tax Professional. Make sure you know the rules as it applies to your situation.


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## kid5022 (Nov 14, 2010)

Thank you for all your input guys.

Just one other question, lets say the computer is use to generate income, and I also use it for my own pleasure, that should be okay right? There is no way that CRA could proof that I use it for personal reason than work. The reason I ask this is that I generate about 1k income, but incur 3k expenses, because its my first year. I hope next year would be better.


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## MoneyGal (Apr 24, 2009)

mind_business said:


> As you can see, computers fall into Class #10 which sets the depreciation rate at 30% ... which is the amount you can claim in a year. [Example: Initial Purchase price = $1000. Year 1 deduction = $300; Year 2 deduction = $210; Year 3 deduction = $147 ... and so forth.


In the first year, you can only claim depreciation at half the stated rate. 

Also, don't use Class 10 (no longer available for computer equipment), use Class 50. http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/cptl/dprcbl-eng.html#class50


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## mind_business (Sep 24, 2011)

kid5022 said:


> Thank you for all your input guys.
> 
> Just one other question, lets say the computer is use to generate income, and I also use it for my own pleasure, that should be okay right? There is no way that CRA could proof that I use it for personal reason than work. The reason I ask this is that I generate about 1k income, but incur 3k expenses, because its my first year. I hope next year would be better.


Do you want us to state what you have to do per CRA rules, or say that it's OK to cheat on your taxes?


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## mind_business (Sep 24, 2011)

MoneyGal said:


> In the first year, you can only claim depreciation at half the stated rate.
> 
> Also, don't use Class 10 (no longer available for computer equipment), use Class 50. http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/cptl/dprcbl-eng.html#class50


Was that a recent change? Looks like they limit Class 10 to computers purchased before 2005.


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## kid5022 (Nov 14, 2010)

mind_business said:


> Do you want us to state what you have to do per CRA rules, or say that it's OK to cheat on your taxes?


Actually my question is does it matter if I also use my work computer for personal use? Or it has to be strictly for biz use? Or If I use it for business use 50% I can only claim 50%? My guess is if I use it for some personal use I cant claim CCA? Not too sure myself.


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## mind_business (Sep 24, 2011)

Technically you should ratio the expense as you described above: business use / total use.

While you don't have enough income to report to worry too much about other types of business expenses, if you're going to increase your income this year don't forget to claim car expenses when applicable. If you have to drive to meet a client, etc ... is a valid expense. Just keep a driving log to track business use of the vehicle. 

Btw, love hearing about people starting their own businesses. It can be a great experience if you apply yourself fully to the success of the business. My wife and I ran a successful business. The one lesson we learned early was that proper advertising pays dividends in building revenue. Good luck!!!


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## kid5022 (Nov 14, 2010)

mind_business said:


> Technically you should ratio the expense as you described above: business use / total use.
> 
> While you don't have enough income to report to worry too much about other types of business expenses, if you're going to increase your income this year don't forget to claim car expenses when applicable. If you have to drive to meet a client, etc ... is a valid expense. Just keep a driving log to track business use of the vehicle.
> 
> Btw, love hearing about people starting their own businesses. It can be a great experience if you apply yourself fully to the success of the business. My wife and I ran a successful business. The one lesson we learned early was that proper advertising pays dividends in building revenue. Good luck!!!


Thank you so much for all your help and kind words. Really help me out alot!!!


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## Homerhomer (Oct 18, 2010)

MoneyGal said:


> In the first year, you can only claim depreciation at half the stated rate.
> 
> Also, don't use Class 10 (no longer available for computer equipment), use Class 50. http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/cptl/dprcbl-eng.html#class50


To further complicate it if the computer equipment was purchased between Jan 29, 2007 and Feb 1, 2011, class 52 should be used with 100% amortization and no half year rule.


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## MoneyGal (Apr 24, 2009)

Crumb -I meant to note that. Thanks for pointing it out. 

The basic rule here is that when you are allocating a class of equipment to a capital cost allowance category, check carefully that you are allocating it correctly. Particularly for computer equipment, the rules change frequently. CRA will not (generally) correct any errors you make in allocating equipment to the "wrong" category. There are not that many categories, and it pays (literally) to get this right.


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