Lucrative Deductions You Probably Overlooked
/You’re likely overlooking a number of deductions that can mean big money back for you at tax time. If you’re already our tax client, no need to worry – we check your deductions to ensure you’re getting the most money back. For everyone else, you’ll absolutely want to read on and see what you may be missing. First, let’s get on the same page:
“What’s a deduction?”
AKA an expense, a deduction reduces your taxes and saves you money. To qualify, it has to be required to operate your business, and has to be reasonable in the circumstances. This last bit comes straight from the CRA (Canadian Revenue Agency). Reasonable means different things to different people, but we get all our info on what constitutes “reasonable” straight from the CRA rulings – so you can be sure you’re onside with them.
“So, why should I care about deductions?”
Claiming deductions (money spent on your business) means money back for you. The more deductions you claim, the more money you get back in your pocket.
“What if I missed some deductions?”
No worries, the CRA generally lets you adjust your return up to three years back, or ten years in some circumstances.
“What kind of proof do I need to claim missed deductions?”
Any claim made to the CRA needs to be accurate and supported. If you’re going to make a claim, it’s ultimately up to you to defend it and provide proof to the CRA (if asked). Having things like receipts or a logbook for mileage are examples of supporting documents.
Our professional bookkeeping tool, the Healthy Wealth Tracker, is the ultimate resource to keep track of all your expenses so you never miss out.
Now that we’re on the same page, let’s take a look at the top 4 deductions for holistic practitioners!
Home office
Practitioners often think that to qualify for a home office they must see patients in their home. This is not necessary! To qualify for a home office, you must meet ONE of the following criteria:
Your home is your principal place of business
You have a dedicated space that is used only for work and you regularly meet clients there
Most practitioners qualify under the first criterion. You don’t need to actually practise there, but you need to perform your “business administration” activities there - things like updating your website, writing blogs, invoicing and updating your Healthy Wealth Tracker. If you have a separate office somewhere else, that might disqualify you.
Having a home office is a game changer. You can now deduct home office related expenses, like rent, mortgage interest, utilities, insurance, and more!
Mileage
Any reasonable travel for business purposes is deductible. Things like picking up supplies, going to a conference, etc. But to claim these deductions, you need to keep track of it. How do you do that? You need to record a couple things. First, you need a mileage log to track your total mileage during the year and your mileage for business travel. Second, you need to record all your vehicle expenses (gas, licence renewal, oil changes, etc.). If that sounds like a lot of work, you’re not bookkeeping with the easiest tool ever. Our Healthy Wealth Tracker makes it super simple, with a section just for mileage and car expenses.
Remember that mileage from your home to your place of work (your clinic) is normally considered a personal expense. Employees of say TD Bank can’t deduct their mileage, so why should you? However, once you qualify for a home office, you suddenly go from personal travel to business travel because you’re now travelling from your home OFFICE to clinic.
Interest on student loans
You’ve likely graduated with one (or several) loans to your name. Having debt hang over your head can be stressful when starting out but it’s important to maintain perspective and think about things holistically. Because of your investment you’ve got a career you love – which isn’t something everyone can say!
Now to the deductions. Interest you pay on government student loans (like OSAP for example) can be deducted. Interest you pay on non-government loans (from RBC for example) cannot be deducted.
This difference is important to remember around tax time, because it means money back, but also when considering the order in which you pay off debt. If you have an interest rate of 5% on an OSAP loan, the after-tax interest rate (meaning taking into considering the deduction you get back on this) is about 4%. So you may have other loans with a higher interest rate that you’d want to focus on paying off first.
Food + beverage
Any reasonable expense for eating out for business purposes is deductible. What kinds of things does this include? We’re talking about things like grabbing a matcha latte with a colleague to discuss opportunities at their clinic, dinner out with your clinic’s owner to discuss the dispensary you’re collaborating on, and ordering lunch into the office while you meet with another associate to plan you’re next lunch-and-learn.
To summarize, any purchase of food and beverage that has a business purpose could be considered a deduction. As with all expenses, it’s ultimately up to you to defend the business purpose of any deduction to the CRA.
Since the business purpose of this type of spending may not be immediately obvious to the CRA (if they were to look through your return), we recommend jotting down the business purpose next to the expense when you enter it into your Healthy Wealth Tracker (and we’ve left a special space next to each expense for you to do this). That way you don’t need to rack your brain trying to remember what the business purpose was for that oat milk latte you purchased 6 months ago – you’ve got it written down already!
We know that tax time can be a stressful and confusing for practitioners – so we hope this list helps put you at ease and makes you feel more confident that you’re getting the money back you deserve.