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A 401 (k) is a tax-advantaged retirement investment account that is offered by an employer. As fixed income, a 401 (k) can be considered an asset.
- Financial Advisor
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- Overview
- Advertising
- Allowance on eligible capital property
- Bad debts
- Business start-up costs
- Business tax, fees, licences and dues
- Delivery, freight and express
- Fuel costs (except for motor vehicles)
- Insurance
- Interest and bank charges
This page discusses the more common expenses you might incur to earn income from your activities. Incur means you paid or will pay the expense.
The amount you can deduct in a given year for any expense depends if it is considered a current year expense or capital expense. For more information, go to Current or capital expenses and Basic information about capital cost allowance (CCA).
You cannot claim expenses you incur to buy capital property. However, as a rule, you can deduct any reasonable current expense you incur to earn income. The deductible expenses include any GST/HST you incur on these expenses minus the amount of any input tax credit claimed.
Also, since you cannot deduct personal expenses, enter only the business part of expenses on Form T2125, T2042 or T2121.
•advertising
•allowance on eligible capital property
You can deduct expenses for advertising, including advertising in Canadian newspapers and on Canadian television and radio stations. You can also include any amount you paid as a finder's fee.
To claim the expenses, you must meet certain Canadian content or Canadian ownership requirements. These requirements do not apply if you advertise on foreign websites.
Restrictions apply to the amount of the expense you can deduct for advertising in a periodical:
•You can deduct all the expense if your advertising is directed at a Canadian market and the original editorial content in the issue is 80% or more of the issue's total non-advertising content.
•You can deduct 50% of the expense if your advertising in a periodical is directed at a Canadian market and the original editorial content in the issue is less than 80% of the issue's total non-advertising content.
You cannot deduct expenses for advertising directed mainly at a Canadian market when you advertise with a foreign broadcaster.
Note
As of January 1, 2017, the eligible capital property (ECP) system was replaced with the new capital cost allowance (CCA) Class 14.1 with transitional rules. For more information, go to Class 14.1 (5%).
You can generally deduct an amount for a bad debt if:
•you had determined that an account receivable is a bad debt in the year
To deduct a business expense, you need to have carried on the business in the fiscal period in which the expense was incurred. You have to be clear about the date your business started.
Where a taxpayer proposes to undertake a business and makes some initial expenditures with that purpose in mind, it is necessary to establish whether the expenditure preceded the start of the business or whether the business had in fact begun and there were expenses incurred during preliminary steps leading to the start of normal operations.
Consequently, the date when the business can be said to have commenced must be known.
Determining what you can claim as a start-up expense can be difficult. For more information, go to Interpretation Bulletin IT-364, Commencement of Business Operations, or see Guide RC4022, General Information for GST/HST Registrants.
You can deduct any annual licence fees and some business taxes you incur to run your business.
You can also deduct annual dues or fees to keep your membership in a trade or commercial association, as well as subscriptions to publications.
You can deduct the cost of delivery, freight and express incurred in the year that relates to your business.
You can deduct the cost of fuel (including gasoline, diesel and propane), motor oil and lubricants used in your business.
For information about claiming the fuel used in your motor vehicle, go to Motor vehicle expenses.
You can deduct all ordinary commercial insurance premiums you incur on any buildings, machinery and equipment you use in your business.
The insurance costs related to your motor vehicle have to be claimed as motor vehicle expenses.
The insurance costs related to business use of workspace in your home have to be claimed as business-use-of-home expenses.
In most cases, you cannot deduct your life insurance premiums. However, if you use your life insurance policy as collateral for a loan related to your business, including a fishing business, you may be able to deduct a limited part of the premiums you paid. For more information, go to Interpretation Bulletin IT-309, Premiums on Life Insurance Used as Collateral.
You can deduct interest incurred on money borrowed for business purposes or to acquire property for business purposes. However, there are limits on:
•the interest you can deduct on money you borrow to buy a passenger vehicle or a zero-emission passenger vehicle. For more information, go to Motor vehicle expenses.
•the amount of interest you can deduct for vacant land. Usually, you can only deduct interest up to the amount of income from the land that remains after you deduct all other expenses. You cannot use any remaining amounts of interest to create or increase a loss, and you cannot deduct them from other sources of income.
•the interest you paid on any real estate mortgage you had to earn fishing income. You can deduct the interest, but you cannot deduct the principal part of loan or mortgage payments. Do not deduct interest on money you borrowed for personal purposes or to pay overdue income taxes.
A capital expense generally gives a lasting benefit or advantage. For example, the cost of putting vinyl siding on the exterior walls of a wooden house is a capital expense. A current expense is one that usually recurs after a short period. For example, the cost of painting the exterior of a wooden house is a current expense.
Sep 8, 2023 · Yes, a 401 (k) is indeed considered an asset. A 401 (k) is a retirement savings account offered by many employers, and it allows employees to contribute a part of their salary, typically on a pre-tax basis. The money in this account is then invested, often in a mix of stocks, bonds, and mutual funds.
Jan 16, 2024 · The average investment expense of plan assets for 401(k) plans with 25 participants and $250,000 in total assets is 1.6% of assets, according to the 23rd Edition of the 401k Averages Book, and is inclusive of investment management fees, fund expense ratios, 12b-1 fees, sub-transfer agent fees, contract charges, wrap and advisor fees, or any other asset based charges.
Apr 18, 2024 · For example, if you take your client to lunch or a hockey game, you can deduct 50% of the cost from your business income. Motor vehicle expenses. In addition to claiming round-trip mileage and parking fees on business-related meetings and excursions, you may be able to claim license and registration fees.
The following may be considered when determining operating expenses: Prepaid expenses. Accounting and legal fees. Advertising expenses. Business tax, fees, licenses and dues. Insurance expenses. Interest and bank charges. Maintenance and repairs. Meals and entertainment.
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