Promoting your business is essential if you want to reach new clients and grow your business. The Canada Revenue Agency (CRA) offers you a few deductions that can reduce the costs of advertising, promotional items, entertainment, and even conventions — though some of these expenses aren’t obvious write-offs. Understanding the CRA’s rules and regulations regarding promotional expenses and small business tax write-offs is key to optimizing your tax deductions.
Business Promotion Expenses and Write-Offs
Business promotion expenses arise from money you spend to spread awareness of your business. Any company can claim these deductions, but the CRA puts limits on certain types of promotion expenses. Each type of expense falls into a few general categories, each of which has slightly different rules for claiming the deductions.
TV and Radio Advertising
If you purchase airtime on TV or radio, you may write off those costs as advertising expenses on your tax return. However, the ads must appear on Canadian TV or radio stations. If you advertise with a foreign broadcaster, you can’t write off the expenses, even if the station directs the ads toward the Canadian market.
So, if you buy a 30-second TV spot in Ontario and the station broadcasts its signal from Ontario, this counts as a write-off for advertising. However, if you buy airtime for your Toronto market and the signal comes from a station in Detroit, that expense isn’t eligible for this deduction. Claim these eligible advertising expenses on line 8521 of Form T2125, the Statement of Business and Professional Activities.
You may also claim expenses related to print advertising on line 8521, but the CRA has special rules on this type of advertising as well. At least 80% of a magazine or newspaper’s non-ad content must be original editorial content. This means the content must consist of news, stories, or similar types of editorial content. If the content features brand-based articles such as advertorials, which have the structure of an article but really promote a specific product or service, the content doesn’t count towards the 80% original editorial format.
If the publication features 80% or more editorial content, you may write off the entire cost of the ads you purchase. However, if less than 80% of the publication’s non-advertising content is editorial content, you can only write off 50% of the expenses.
Another form of print media includes billboards and flyers. You can deduct the costs of printing your promotional materials, and you can even deduct the costs associated with hiring a graphic designer to make a sales flyer or run a billboard ad.
Promotional swag, such as pens, T-shirts, keychains and notepads, count as deductions for business promotion because you distribute them to customers and prospects. These types of promotional items have your business name and logo clearly printed on them so people can identify your business. Don’t forget to put your business website on them so people know how to contact you for inquiries.
Deduct the full cost of online advertising, whether you buy a banner ad to go on an organization’s website or Facebook ads to draw customers to your website. Additionally, if you hire a social media manager or any other professional to help with online advertising, you can deduct the cost of wages or consultancy fees on line 9060 of Form 2125. Similarly, if you pay costs to maintain a website, you can also write off those expenses as business costs.
Entertainment and Meals
In some cases, promoting your company means sitting down and having a one-on-one chat with a prospective new client, partner or investor. If you incur entertainment or meal expenses related to promoting your business, you can write off half of those expenses. Specific items have certain limits. For example, while you can deduct the cost of a meal at a country club, you cannot deduct green fees for a game of golf. If you treat your employees to lunch, you can claim six of these types of meals per year. Entertainment expenses include tickets for sporting events and concerts.
You can deduct some of these expenses fully, but you can only claim 50% of costs from entertaining clients at restaurants or ballgames. Just be sure these events have a business purpose and are not strictly for pleasure.
Conventions and Trade Shows
Attending conventions allows you to learn more about your industry, promote your company, and network with like-minded entrepreneurs. The CRA allows you to write off the cost of two industry conventions per year, but you may only write off the cost of half the food you buy at the convention. A company or organization must host the convention in the geographic area where it normally conducts its business. If the business has all of its customers in Nova Scotia, you can’t claim the deduction for convention expenses if it hosts an event in Vancouver.
All of these types of business promotion expenses can potentially reap benefits at tax time. That’s why you should keep detailed records of every dollar you spend on marketing and advertising as you promote your company. Some of these expenses may not seem substantial at the point of purchase, but accumulated over a year these costs can significantly reduce your tax bill as long as they qualify. QuickBooks helps you track expenses so you can effortlessly integrate these costs into your tax forms.
QuickBooks Online can help you maximize your tax deductions. Keep more of what you earn today.