To minimize your tax liability as a business owner, you need to maximize your tax deductions. Luckily, you may be able to claim certain leisure activities as business expenses.
The classic example involves business lunches and dinners. If you meet with a client to discuss business over food and drinks, you can write off 50 percent of your expenses, as long as the amount spent is reasonable. Beyond that, most businesses can write off 50 percent of the cost of leisure activities such as attending sporting events or concerts with clients, going on cruises, paying admission to fashion shows, and entertaining clients at night clubs. A few specific businesses, including long-haul truckers and hotels, can even write off more; see your tax professional for details.
Before making a claim, check with an accounting professional to make sure the claim is allowable. The Canada Revenue Agency has nuanced rules on these claims. For instance, you usually cannot claim the cost of season sporting tickets. Similarly, you cannot claim green fees for golfing, but you can claim the meal you eat after golfing, as long as the outing is related to your business. To back up all of these claims, keep your receipts, but also make notes on how the event relates to your business. Those records can be essential in an audit.
In select cases, you can claim 100 percent of the cost of certain leisure activities. Most notably, you can throw up to six parties per year for your employees, and write off all the costs as business expenses.
Entertaining your clients is essential in many industries, and in sales, taking your clients to lunch or out on the town can be a great way to seal the deal. The CRA recognizes the importance of these types of activities in business, and because of that, you may be able to claim a write-off. Don’t forget to track these expenses so you can claim the deductions you deserve.