Business and Professional Income 2013

T4002(E) Rev. 13

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Table of contents

Is this guide for you?

Use this guide if you are a sole proprietor, an unincorporated individual or a partner in a partnership, that is a business person, or a professional. It will help you calculate the business or professional income to report on your 2013 income tax return. Self-employed commission salespersons should also use this guide to determine the income to report in 2013.

You are considered to be self-employed if you have a business relationship with a payer and you also have the right to determine where, when, and how your work is done. For more information, see Guide RC4110, Employee or Self-Employed?

Throughout this guide, we refer to other guides, forms, interpretation bulletins, and information circulars. Generally, if you need any of these, go to Forms and publications. You may want to bookmark this address for easier access to our website in the future.

Unless otherwise noted, all legislative references are to the Income Tax Act and the Income Tax Regulations.

What's new for 2013?

Hiring credit for small businesses

Under proposed changes, the hiring credit for small businesses will be extended for 2013. This credit would provide up to $1000 against a small firm's increase in its 2013 employment insurance EI premiums over those paid in 2012 to employers with total EI premiums of $15,000 or less in 2012. For more information, go to Hiring credit for small business.

Internet business activities

Page 1 of Form T2125, Statement of Business or Professional Activities, has been revised to include information concerning Internet business activities.

Register for online mail

You can now choose to receive notices of assessment and reassessment as well as some letters online. When you register for online mail, the Canada Revenue Agency (CRA) will no longer print and mail correspondence items to you. Instead, you will receive an email to notify you that there is mail to view in your secure online business account at My Business Account. For more information, see Receive your CRA mail online

Revised information return for partnerships

The returns, forms and schedules that make up the partnership information return have been revised for 2013.

The T5013 slip and Summary were redesigned and the box numbering changed. The T5013A slip is now obsolete and the information that was previously reported on it is now included on the revised T5013 slip.

The redesigned T5013 slip now has two slips per page and has fewer fixed boxes, 12 generic boxes and four text boxes, for entering additional text information.

Definitions

Arm's length - Relationship or transaction between persons who act in their separate interests.

Related persons are not considered to be dealing with each other at arm's length. Related persons include individuals connected by a blood relationship, marriage, common-law partnership, or adoption (legal or in fact). A corporation and an individual, or two corporations, may also be related persons.

Unrelated persons might not be dealing with each other at arm's length at a particular time. For example, one person is under the influence or control of the other, or the persons are considered to be acting together. Each case depends upon its own facts. For more information, see Interpretation Bulletin IT‑419, Meaning of Arm's Length.

Available for use – Generally, an asset is considered to become available for use and eligible for capital cost allowance (CCA) and investment tax credit at the earliest of:

  • the time the property is first used by the claimant to earn income; and
  • the time the property is delivered or is made available to the claimant and is capable of producing a saleable product or service.

Capital cost – The amount on which you first claim capital cost allowance. The capital cost of a property is usually the total of:

  • the purchase price (not including the cost of land, which is not depreciable);
  • the part of your legal, accounting, engineering, installation, and other fees that relates to buying or constructing the property (not including the part that applies to land);
  • the cost of any additions or improvements you made to the property after you acquired it, if you did not claim these costs as a current expense (such as modifications to accommodate persons with disabilities); and
  • for a building, soft costs (such as interest, legal and accounting fees, and property taxes) related to the period you are constructing, renovating, or altering the building, if these expenses have not been deducted as current expenses.

Capital cost allowance (CCA) – The deduction you can claim over a period of several years for the cost of depreciable property, that is, property that wears out or becomes obsolete over time such as a building, furniture, or equipment, that you use in your business or professional activities.

Depreciable property – The property on which you can claim CCA. It is usually capital property used to earn income from a business or property. The capital cost can be written off as CCA over a number of years. You usually group depreciable properties into classes. For example, diggers, drills, and tools acquired after May 1, 2006, that cost $500 or more belong in Class 8. You have to base your CCA claim on the rate assigned to each class of property.

Fair market value (FMV) – Generally, the highest dollar value you can get for your property in an open and unrestricted market between an informed and willing buyer and an informed and willing seller who are dealing at arm's length with each other.

Non arm's length - Relationship or transaction between two persons who are related to each other.

However, a non arm's length relationship might also exist between unrelated individuals, partnerships, or corporations, depending on the circumstances. For more information, see the definition for arm's length.

Motor vehicle – An automotive vehicle designed or adapted for use on highways and streets. A motor vehicle does not include a trolley bus or a vehicle designed or adapted to be operated only on rails.

Passenger vehicle – A motor vehicle designed or adapted primarily to carry people on highways and streets. It seats a driver and no more than eight passengers. Most cars, station wagons, vans, and some pick-up trucks are passenger vehicles. They are subject to the limits for CCA, interest, and leasing. A passenger vehicle does not include:

  • an ambulance;
  • a clearly marked police or fire emergency response vehicle;
  • a motor vehicle you bought to use more than 50% as a taxi, a bus used in the business of transporting passengers, or a hearse used in a funeral business;
  • a motor vehicle you bought to sell, rent, or lease in a motor vehicle sales, rental, or leasing business;
  • a motor vehicle (except a hearse) you bought to use in a funeral business to transport passengers;
  • a van, pick-up truck, or similar vehicle that seats no more than the driver and two passengers and that, in the tax year you bought or leased it, was used more than 50% to transport goods and equipment to earn income;
  • a van, pick-up truck, or similar vehicle that, in the tax year you bought or leased it, was used 90% or more to transport goods, equipment, or passengers to earn income;
  • a pick-up truck that, in the tax year you bought or leased it, was used more than 50% to transport goods, equipment, or passengers to earn or produce income at a remote work location or at a special work site that is at least 30 kilometres from the nearest community with a population of at least 40,000; and
  • a clearly marked emergency medical service vehicle used to carry paramedics and their emergency medical equipment.

Proceeds of disposition – Usually the amount you received or will receive for your property. In most cases, it refers to the sale price of the property. This could also include compensation you received for property that has been destroyed, expropriated, or stolen.

Undepreciated capital cost (UCC) – Generally, the amount left after you deduct CCA from the capital cost of a depreciable property. Each year, the CCA you claim reduces the UCC of the property.

Chapter 1 – General information

This chapter has general information that applies to all businesses (including self-employed commission sales) and professional activities. It also has information specifically for partnerships.

Business and business income

A business is an activity that you intend to carry on for profit and there is evidence to support that intention.

A business includes:

Note

For the purpose of this guide and for other reporting purposes, professional activities will be discussed as a separate category of business.

Business income includes income from any activity you do for profit. For example, income from a service business is business income. However, business income does not include employment income.

Note

Include all your income when you calculate it for tax purposes. If you do not report all your income, you may be subject to a penalty of 10% of the amount you did not report after your first omission.

A different penalty may apply if you knowingly or under circumstances amounting to gross negligence participate in making a false statement or an omission on your income tax return. This penalty is 50% of the tax attributable to the omission or the false statement (minimum $100).

Gift cards or certificates

A gift card or certificate is a monetary-equivalent, (such as vouchers, receipts, tickets) that has a stated value and provides for payment of goods and services in the amount of the stated value.

If you sell gift cards or certificates, you must report, as business income, the amounts received from the sale on the date they are sold. A business may choose to calculate a reserve as a deduction against this income. A reserve is the amount of gift cards or certificates that you anticipate will be redeemed after the end of your fiscal year. A reserve amount that is deducted against business income in one year must be added back to business income the following year. It is your choice whether you calculate a reserve.

Do not collect the goods and services tax/harmonized sales tax (GST /HST) when a gift card or certificate is sold. When a customer uses a gift card or certificate as payment for a product or service, calculate the GST/HST on the total price of the item or service. Deduct the amount of the gift card or certificate from the amount the customer owes.

If you have already filed but have not reported income from gift cards or certificates, you can change your return online at My Account for Individuals. To find out how to change your return, go to How to change your return. For more information about the Voluntary Disclosure Program, go to Voluntary Disclosure Program. For more information, see Publication P-202, Gift Certificates or call us at 1-800-959-5525.

You were asking?

Q. When does a business start? Can you deduct the costs you incur before and during the start of a business?

A. We look at each case on its own merits. Generally, we consider your business to have started when you begin some significant activity that is a regular part of the business or that is necessary to get the business going.

For example, suppose you decide to start a merchandising business and you buy enough goods for resale to start the business. At this point, we would consider the business to have started. Usually you can deduct the expenses you incur for the business from that date. You could still deduct the expenses even if, despite all your efforts, the business ended.

On the other hand, assume you review several different business prospects in the hope of going into a business of some kind. In this case, we would not consider your business to have started, and you could not deduct any of the costs you incur.

For more information about starting a business, see Interpretation Bulletin IT‑364, Commencement of Business Operations.

The law allows Statistics Canada to retrieve business information collected by the CRA. Statistics Canada can now share with provincial statistical agencies, for research and analysis purposes only, data concerning business activities carried on in their respective provinces.

How to report your business income

Fiscal period

You report your business income based on a fiscal period. A fiscal period is the time covered from the day your business starts its business year to the day it ends its business year. For an existing business, the fiscal period is usually 12 months. A fiscal period cannot be longer than 12 months. However, it can be shorter than 12 months in some cases, such as when a new business starts or when a business ends.

Self-employed individuals generally have to use a December 31 year-end. If you are an eligible individual, you may be able to use another method of reporting your business income that allows you to keep a fiscal period that does not end on December 31. If your fiscal year-end is not December 31, you will need Guide RC4015, Reconciliation of Business Income for Tax Purposes, to calculate the amount of business income to report on your 2013 income tax return. The guide includes Form T1139, Reconciliation of 2013 Business Income for Tax Purposes.

If you filed Form T1139 with your 2012 income tax return, generally you have to file that form again for 2013.

Accrual method

In most cases, as a self-employed individual, you report business income by using the accrual method of accounting. With this method, you:

  • report your income in the fiscal period you earn it, regardless of when you receive the income; and
  • deduct expenses in the fiscal period you incur them, whether you paid them in that period or not. Incur usually means you either paid or will have to pay the expense.

Income from professional activities is business income. Therefore, you report it using the accrual method.

Cash method

If you are a self-employed commission salesperson, you can use the cash method to report your income and expenses, as long as it accurately shows your income for the year.

With this method, you:

  • report income in the fiscal period you receive it; and
  • deduct expenses in the fiscal period you pay them.

Business records

You are required by law to keep records of all your transactions to support your income and expense claims.

Keep a record of your daily income and expenses. We do not issue record books or suggest any type of book or set of books. There are many record books and bookkeeping systems available. For example, you can use a book that has columns and separate pages for income and expenses.

Keep your records, along with your duplicate deposit slips, bank statements, and cancelled cheques. Keep separate records for each business you run. If you want to keep computerized records, make sure they are clear and easy to read.

Note

Do not send your records with your income tax return. However, keep them in case we ask to see them later.

Benefits of keeping complete and organized records

You can benefit from keeping complete and organized records. For example:

  • When you earn income from many places, good records help you identify the source of the income. If you keep proper records, you may be able to prove that some income is not from your business, or that it is not taxable.
  • Keeping good records will remind you of expenses you can deduct when it is time to do your income tax return.
  • Good records will keep you better informed about the past and present financial position of your business.
  • Good records can help you budget, spot trends in your business, and get loans from banks and other lenders.
  • Good records can prevent problems you may run into if we audit your income tax returns.

Consequences of not keeping adequate records

If you do not keep the necessary information and you do not have any other proof, we may have to determine your income using other methods. We may also disallow expenses you deducted if you are unable to support them.

There are penalties for not keeping adequate records, for not giving the CRA access to your records when requested, and for not giving information to CRA officials when asked.

Income records

Keep track of the gross income your business earns. Gross income is your total income before you deduct the cost of goods sold and expenses. Your income records should show the date, amount, and source of the income. Record the income whether you received cash, property, or services. Support all income entries with original documents. Original documents include sales invoices, cash register tapes, receipts, bank deposit slips, patient cards, fee statements, and contracts.

Example

The following sales journal is an example of how to record your income for the month of July:

Record of daily sales particulars
not applicableDateParticularsCash sales (1)Footnote 1Credit sales (2)Footnote 1Sales returns (3)Footnote 1Total sales (4)Footnote 1GST (5%) (5)Footnote 2PST (8%) (6)Footnote 2Payment on account (7)
Footnotes
Footnote 1

Does not include the GST, PST, or HST.

Return to footnote 1referrer

Footnote 2

If you sell to a resident in one of the participating provinces, the HST replaces the GST and the PST. For more information on the HST, see Guide RC4022, General Information for GST/HST Registrants.

Return to footnote 2 referrer

1 July 1 Daily sales $146.00 $27.00 Empty field for value$0 $173.00 $8.65 $13.84 $10.00
2 July 2 Daily sales $167.00 $36.25 $26.00 $177.25 $8.86 $14.18 Empty field for value$ 0
3 July 3 Daily sales $155.02 $19.95 $10.01 $164.96 $8.25 $13.20 $32.40
4 July 4 Daily sales $147.00 $29.95 Empty field for value$0 $176.95 $8.85 $14.16 Empty field for value$ 0

On July 1, you examine the sales invoices and cash register tapes. You find that you had cash sales of $146 and sales on account of $27. In the sales journal, you record the cash sales in column 1 and the credit sales in column 2. Since there were no merchandise returns on July 1, leave column 3 blank. Column 4 then shows the total of your cash sales and your credit sales minus any merchandise returned for the day. In columns 5 and 6, show the total GST and PST you charged on your sales.

In column 7, keep track of any cash received on previous credit sales. Do not include the amount in the daily sales figures since you would have included it in the sales figures on the day the sale took place.

Expense records

Always get receipts or other vouchers when you buy something for your business. When you buy merchandise or services, the receipts have to show:

  • the date of the purchase;
  • the name and address of the seller or supplier;
  • the name and address of the buyer; 
  • a full description of the goods or services; and
  • the vendor's business number if they are a GST/HST registrant.
Example

The following expense journal is an example of how to record expenses for the month of July:

How to record daily expenses for the month of July
DateParticularsCheque No.BankGST (5%)Footnote 1PurchasesLegal & Acct.Adv.FeesRepairsCapital items
Footnotes
Footnote 1

If you reside in one of the participating provinces, the HST replaces the GST and the PST. For more information on the HST, see Guide RC4022, General Information for GST/HST Registrants.

Return to footnote 1referrer

July 1 XYZ Radio 407 367.50 17.50 Empty space for vale 0 Empty space for vale 0 350.00 Empty space for vale 0 Empty space for vale 0 Empty space for vale 0
July 1 Smith Hardware 408 26.95 1.28 Empty space for vale 0 Empty space for vale 0 Empty space for vale 0 Empty space for vale 0 25.67 Empty space for vale 0
July 2 City of Ottawa 409 157.50 7.50 Empty space for vale 0 Empty space for vale 0 Empty space for vale 0 150.00 Empty space for vale 0 Empty space for vale 0
July 3 Andy's Accounting 410 262.50 12.50 Empty space for vale 0 250.00 Empty space for vale 0 Empty space for vale 0 Empty space for vale 0 Empty space for vale 0
July 5 Wholesale Supply Inc. 411 1,836.60 87.46 1,749.14 Empty space for vale 0 Empty space for vale 0 Empty space for vale 0 Empty space for vale 0 Empty space for vale 0
July 5 Ed's Used Cars 412 1,575.00 75.00 Empty space for vale 0 Empty space for vale 0 Empty space for vale 0 Empty space for vale 0 Empty space for vale 0 1,500.00

You were asking?

Q. What should I do if there is no description on a receipt?

A. When you buy something, make sure the seller describes the item. However, sometimes that is not possible, as with a cash register tape. In this case, you should write what the item is on the receipt or in your expense journal.

Q. What should I do if a supplier does not want to give me a receipt?

A. When you buy something, make sure you ask for a receipt. Suppliers who are GST/HST registrants are required to provide receipts if requested of them. You have to get documentary evidence to support the transactions you enter in your books and records. Your business -related transactions may be denied if you do not have the proper documentary evidence to support your purchases. For more information, see Guide RC4022, General Information for GST/HST Registrants.

Keep a record of the properties you bought and sold. This record should show who sold you the property, how much you paid for it, and the date you bought it. This information will help you calculate your claim for capital cost allowance (CCA) and other amounts.

If you sell or trade a property, show the date you sold or traded it and the amount of the payment or credit from the sale or trade-in.

Time limits for keeping records

Depending on the situation, keep your records and related vouchers for the following lengths of time:

  • if you file your income tax return on time, a minimum of six-years after the end of the tax year to which they relate;
  • if you file your income tax return late, six-years from the date you file that return; and
  • if you file an objection or appeal, until either:
    • the issue is settled and the time for filing any further appeal expires; or
    • the six-year period mentioned above has expired, whichever is later.

These retention periods do not apply to certain records. For more information, see Information Circular IC78-10R Books and Records Retention/Destruction.

If you want to destroy your records and related vouchers before the minimum six-year period is over, you must first get written permission from your tax services office. To do this, either use Form T137, Request for Destruction of Records, or prepare your own written request. For more information, see Guide RC4409, Keeping Records, or go to Keeping records.

Instalment payments

As a self-employed individual, you may have to make instalment payments for 2014. Your 2014 instalment payments are due on March 15, June 15, September 15, and December 15. In most cases, we will send you an instalment reminder showing an instalment amount we have calculated for you. However, there are different methods for calculating instalment payments.

For more information about instalment payments and instalment interest charges, see Pamphlet P110, Paying Your Income Tax by Instalments.

You may have to pay interest and a penalty if you do not pay the full instalment amount you owe on time.

Note

If any of the dates mentioned above falls on a Saturday, a Sunday, or a statutory holiday, you have until the next business day to make your instalment payment.

Dates to remember

February 28, 2014 – If you have employees, file your 2013 T4 and T4A information returns by this date. Also, give your employees their copies of the T4 and T4A slips by this date.

March 15, 2014 – Make your first 2014 instalment payment by this date.

March 31, 2014 – Most partnerships will file a partnership information return by March 31, 2014. However, there are exceptions. See Guide T4068, Guide for the Partnership Information Return (T5013 Forms).

April 30, 2014 - Pay any balance owing for 2013 by this date. Also, file your 2013 income tax return if the expenditures of the business are mainly the cost or the capital cost of tax shelter investments.

June 15, 2014 - Make your second 2014 instalment payment by this date. Also, file your 2013 income tax return by this date if you have self-employment income or if you are the spouse or common-law partner of someone who does, unless the expenditures of the business are mainly the cost or the capital cost of tax shelter investments. Remember to pay any balance owing by April 30, 2014, to avoid interest charges.

June 30, 2014 or the period end date plus 6 months - if your business is involved in the construction industry and hires subcontractors, you may be required to file a Form T5018SUM, Summary of Contract Payments, to report your payments. For more information, go to Contract Payment Reporting System and choose the topic entitled "Construction industry (T5018)"

September 15, 2014 – Make your third 2014 instalment payment by this date.

December 15, 2014 – Make your fourth 2014 instalment payment by this date.

Note

If any of the dates mentioned above falls on a Saturday, a Sunday, or a statutory holiday, you have until the next business day to file your return or make your payment.

Employment insurance (EI) premiums on self-employed income

Self-employed individuals can choose to pay EI premiums to be eligible to receive EI special benefits. For example, if you registered in 2013 to participate in this program, premiums for  2013 will be calculated on your 2013 income tax return and will be payable by April 30, 2014.

Subsequently, if you pay your income tax by instalments, EI premiums may be included in your instalment payments.

When you register for the program, EI premiums will be payable on your self-employment income for the entire year, regardless of the date you register. For example, whether you register in April 2013 or December 2013, you will pay EI premiums on your self-employment income for the entire 2013 year.

EI premiums are payable on your earnings from self-employment, up to an annual maximum amount. The annual maximum insurable amount for 2013 is $47,400.

Remember to claim the corresponding provincial or territorial non-refundable tax credit, on line 5829 of your provincial or territorial Form 428.

For more information, visit Service Canada.

GST/HST registration

You must register for the GST/HST if your worldwide gross revenue from your qualifying goods and services is more than $30,000 in a single calendar quarter or over four consecutive calendar quarters. The qualifying goods and services include those that are subject to GST/HST, those that are taxed at 0% (zero-rated) and those from all your associates. If you operate a taxi or limousine service, you have to register for the GST/HST regardless of your income.

If your gross revenue is equal to or less than $30,000, you do not have to register, but you can do so if you want to. It may benefit you to register because GST/HST registrants can claim input tax credits.

Note

Nova Scotia, New Brunswick, Ontario, Newfoundland and Labrador, and Prince Edward Island harmonized the GST with their provincial sales tax to create the HST.

As of April 1, 2013, British Columbia returned to PST and GST at the rate of 5%. Also on April 1, 2013, Prince Edward Island implemented the HST at the rate of 14%.

For more information on the GST/HST, go to Goods and services tax/harmonized sales tax (GST/HST). For more information on who is required to be registered, see the GST/HST Memoranda Series, 2-1 Required registration.

The GST/HST Registry

The GST/HST Registry is an online service that allows you to validate the GST/HST number of a business, which helps make sure that claims submitted for input tax credits include only the GST/HST charged by suppliers who are registered for the GST/HST. For more information, go to Goods and services tax/harmonized sales tax (GST/HST).

You can validate the Quebec Sales Tax (QST) registration number by going to Validation of a QST Registration Number on the Revenu Québec website.

What is a partnership?

A partnership is usually the relationship between persons who carry on a business in common (partners) with the belief they will make a profit. You can have a partnership without a written agreement. To help you decide if you are a partner in a certain business, determine the type and extent of your involvement in the business and check the laws of your province or territory.

When you form, change, or dissolve a relationship that may be a partnership, consider:

  • whether the relationship is a partnership;
  • the special rules about capital gains or losses and the recapture of CCA that apply when you transfer properties to a partnership;
  • the special rules that apply when you dissolve a partnership; and
  • the special rules that apply when you sell or dispose of your interest in a partnership.

For more information about partnerships, see Interpretation Bulletin IT‑90, What is a Partnership?

Limited partnership

A limited partnership is a partnership that gives its partners limited responsibilities that are similar to those given to shareholders of a corporation. A limited partner's liability as a partner of the partnership is, like its name implies, limited. A general partner, on the other hand, has unlimited liability.

Reporting partnership income

A partnership does not generally pay income tax on its income and does not file an income tax return. Instead, each partner files an income tax return to report his or her share of the partnership's net income or loss. This requirement is the same whether the share of income was received in cash or as a credit to one of the partnership's capital accounts.

Partnership losses

A partnership can have a loss. However, apply the loss carry-over rules to each partner and not to the partnership. For example, when you complete your own income tax return, combine your share of the partnership non-capital losses with any other non-capital losses you have in the year. Apply this amount against your income, according to the regular loss application rules.

The loss carry forward period is 20 years for:

  • non-capital losses, farm losses, restricted farm losses, and life insurer's Canadian life investment losses incurred; and
  • investment tax credits earned for scientific research and experimental development (SR&ED).

Filing requirements for partnerships

For 2011 and later tax years, a partnership that carries on a business in Canada, or a Canadian partnership with Canadian or foreign operations or investments, has to file a T5013 partnership information return for each of its fiscal periods if:

  • at the end of the fiscal period, the partnership has an absolute value of revenues plus an absolute value of expenses of more than $2 million, or more than $5 million in assets; or
  • anytime during the fiscal period,
    • the partnership is a tiered partnership (for example the partnership has another partnership as a partner or is itself a partner in another partnership);
    • the partnership has a corporation or a trust as a partner;
    • the partnership invested in flow-through shares of a principal business corporation that incurred Canadian resource expenses and renounced those expenses to the partnership; or
    • the Minister of National Revenue requests one in writing.

For more information about the partnership information return, go to Partnership and information return filing requirements or see Guide T4068, Guide for the Partnership Information Return (T5013 Forms).

Capital cost allowance (CCA)

A partnership can own depreciable property and claim CCA on it. Individual partners however cannot claim CCA on property the partnership owns.

From the capital cost of depreciable property, subtract any investment tax credit allocated to the individual partners. We consider this allocation to be made at the end of the partnership's fiscal period. Also, you have to reduce the capital cost by any type of government assistance received. Box 040 of your form T5013 will show the amount of CCA the partnership claimed on your behalf. This amount has already been deducted from your business income in box 116 or your professional income in box 120 of the form T5013. Do not deduct this amount again. For more information about CCA and the adjustments to capital cost, see Chapter 4.

Any taxable capital gain or recapture from the sale of property the partnership owns is included in the income of the partnership. Also, any allowable capital or terminal loss from the sale of partnership-owned property is the loss of the partnership. For more information about capital gains and losses, as well as recapture and terminal losses, see Chapter 4.

Eligible capital expenditures

A partnership can own eligible capital property and deduct an annual allowance. Any income from the sale of eligible capital property the partnership owns is income of the partnership. For more information about eligible capital expenditures, see Chapter 5.

GST/HST rebate for partners

If you are an individual who is a member of a partnership, you may be able to get a rebate for the GST/HST you paid on certain expenses.

You may qualify for the GST/HST partner rebate if:

  • the partnership is a GST/HST registrant; and
  • you personally paid GST/HST on expenses that:
    • you did not incur on the account of the partnership; and
    • you deducted from your share of the partnership income on your income tax return.

However, special rules apply if the partnership reimbursed you for those expenses.

Examples of expenses subject to the GST/HST are vehicle costs, and certain business-use-of-home expenses. The rebate may also apply to the GST/HST you paid on motor vehicles, musical instruments, and aircraft, for which you deducted CCA.

The eligible portion of CCA is the part of CCA that you deduct on your income tax return in the tax year, that relates specifically to a motor vehicle, musical instrument, or aircraft on which you paid GST/HST and that is eligible for the rebate to the extent that the partnership used the property to make taxable supplies.

If you deduct CCA on more than one property of the same class, you have to separate the part of the CCA for the property that qualifies for the rebate from the CCA for the other property. If any part of the rebate relates to the CCA deduction for a motor vehicle, a musical instrument, or an aircraft, you have to reduce the undepreciated capital cost (UCC) of the related property by that part of the rebate.

File Form GST370, Employee and Partner GST/HST Rebate Application, to claim your GST/HST rebate for partners. If you get this rebate, you have to include it in your income for the tax year in which you receive it.

For example, if in 2013 you receive a GST/HST rebate for the 2012 tax year (on your 2012 notice of assessment) you have to include the amount of the rebate on your income tax return for 2013:

  • Report the amount of the GST/HST rebate for partners that relates to eligible expenses other than CCA on line 9974 in Part 6 of your Form T2125, Statement of Business or Professional Activities.
  • In column 2 of Area A of your 2013 Form T2125, reduce the UCC for the beginning of 2013 by the part of the rebate that relates to the eligible CCA.

For more information, see Guide RC4091, GST/HST Rebate for Partners, which includes Form GST370, Employee and Partner GST/HST Rebate Application.

Example

Patrick is a partner in an Alberta partnership called ABC Contracting. The partnership is registered for the GST/HST and has a December 31 year-end. Under the partnership agreement, Patrick is required to personally pay his motor vehicle expenses. Patrick's GST/HST fraction is (5/105). GST/HST fractions are listed in Guide RC4091, GST/HST Rebate for Partners.

The following are his 2013 motor vehicle expenses for which he did not receive any allowance or reimbursement:

Total eligible expenses other than CCA
$3,150.84 
CCA
5,100.00 
Total eligible expenses including CCA
$8,250.84 

Patrick calculates the GST/HST rebate for partners that he is entitled to as follows:
$8,250.84 × (5/105) = $392.90
He will file Form GST370 and include $392.90 on line 457 of his 2013 income tax return.

Patrick calculates the GST/HST rebate for partners related to his eligible expenses other than CCA:
$3,150.84 × (5/105) = $150.04
When filing his 2014 income tax return, he will include $150.04 on line 9974 in Part 6 of his 2014 Form T2125, Statement of Business or Professional Activities.

Patrick also calculates the amount of the GST/HST rebate for partners that relates to CCA:
$5,100 × (5/105) = $242.86
When filing his 2014 income tax return, he will reduce the 2014 beginning UCC of his motor vehicle by $242.86 in column 2 of Area A of his 2014 Form T2125.

Investment tax credit

An investment tax credit lets you subtract, from the taxes you owe, part of the cost of some types of property you acquired or expenditures you incurred. You may be able to claim this tax credit in 2013 if you bought qualifying property, incurred qualified expenditures, or were allocated renounced Canadian exploration expenses. You may also be able to claim the credit if you have unused investment tax credits from years before 2013. For more information about investment tax credits, see Form T2038 (IND), Investment Tax Credit (Individuals).

Apprenticeship job creation tax credit

The apprenticeship job creation tax credit (AJCTC) is a non-refundable investment tax credit equal to 10% of the eligible salaries and wages payable to eligible apprentices for employment after May 1, 2006. The maximum credit an employer can claim is $2,000 per year for each eligible apprentice.

An "eligible apprentice" is someone who is working in a prescribed trade in the first two years of his or her apprenticeship contract. The contract must be registered with a federal, provincial, or territorial government under an apprenticeship program designed to certify or license individuals in the trade.

The amount of the credit is added to the investment tax credit and is available to reduce federal taxes payable for the tax year. Unused amounts can be carried back 3 years and carried forward 20 years. The AJCTC is reported on Form T2038 (IND), Investment Tax Credit (Individuals).

Investment tax credit for child care spaces

Employers who carry on a business in Canada, other than a child care services business, can include a non-refundable amount in their investment tax credit calculation for each new child care space they create in a licensed child care facility they operate for the benefit of the children of their employees. This non-refundable amount is equal to $10,000 per child care space created or 25% of the eligible expenditure incurred after March 18, 2007, whichever is less. For more information, see Form T2038 (IND), Investment Tax Credit (Individuals).

Chapter 2 – Income from a business or profession

Sole proprietorships

If you are a sole proprietor, you must complete all the applicable areas and lines on Form T2125, Statement of Business or Professional Activities.

Partnerships

The details of your business or professional activities that you have to give us depend on the type of partnership you are in. If you are a partner in a partnership that has to file a partnership information return, complete Form T2125, Statement of Business of Professional Activities as follows:

  • Complete the "Identification" area.
  • Enter on line M in Part 6 the amount of income shown in box 116, "Business income," box 120, "Professional income," or box 122, "Commission income" of your T5013 slip, Statement of Partnership Income.
  • Complete the "Other amounts deductible from your share of net partnership income (loss)" chart of the form to claim any expenses the partnership did not reimburse you for and any other deductible amounts. Also complete the "Calculation of business-use-of-home expenses" chart if applicable, for more information, read Line 9945.
  • If you did not make any adjustments to the amount in box 116, box 120, or box 122 of your T5013, the amount you enter on line 9946 will be the same as the amount you entered on line M.

If you are a partner in a partnership that does not have to file a partnership information return, complete Form T2125, Statement of Business and Professional Activities, as follows:

  • Complete the "Identification" area.
  • Calculate the business income for all partners.
  • Calculate the business part of expenses for all partners.
  • Complete the "Other amounts deductible from your share of net partnership income (loss)" chart to claim any expenses that the partnership did not reimburse you for and any other deductible amounts. Also complete the "Calculation of business-use-of-home expenses" chart if applicable. For more information, see Line 9945.
  • Complete the "Details of other partners" chart.

To see if your partnership has to file a partnership information return, see What is a partnership?.

We explain how to complete each of the lines on Form T2125 in this chapter, as well as in Chapter 3.

How to complete Form T2125, Statement of Business or Professional Activities

In this guide, you will find two copies of Form T2125, Statement of Business or Professional Activities. This form can help you calculate your income and expenses for income tax purposes. We encourage you to use it. However, we will continue to accept other types of financial statements.

If you have both business and professional income, you have to complete a separate Form T2125 for each. You also have to complete a separate form for each business or professional activity you have, if you have two or more of either. For more information, see Interpretation Bulletin IT‑206, Separate Businesses.

File each completed Form T2125 with your income tax return.

Identification

Complete all the lines that apply to your business or professional activities.

Enter your account number (15 characters), assigned by the CRA, in the appropriate area.

Indicate the period your business year covered, which is your fiscal period. For an explanation see Fiscal Period.

Enter the industry code that corresponds to your business from the Appendix.

If more than one code describes your business, or if your business has more than one activity, use the code that most closely describes your main business activity. For example, you might operate a bookstore. However, the store might also sell postage stamps. You would use industry code 451210 (for books or stationery) and not industry code 491110 (for postal services).

If you have a tax shelter, enter the identification number on the appropriate line. If you are claiming a deduction or losses for 2013, attach to your income tax return any applicable T5003 slip, Statement of Tax Shelter Information as well as a completed Form T5004, Claim for Tax Shelter Loss or Deduction. For more information on tax shelters, go to Tax Shelters.

Note

Tax shelter numbers are used for identification purposes only. They do not guarantee that taxpayers are entitled to receive the proposed tax benefits.

Tax tip

For more information about how to protect yourself against tax schemes, go to Alert.

If your business or professional activities are the activities of a partnership, enter the 9-digit partnership business number from the T5013 received, and identify your percentage of the partnership if applicable.

If you are not preparing Form T2125 yourself, enter the name and address of the person or firm that is preparing it for you.

Internet business activities

You may earn income from your webpages or websites:

  • By selling goods and/or services on your own page(s) or site(s). You may have a shopping cart and process payment transactions yourself or use a third party service.
  • If your site doesn't support transactions but your customers call, complete and submit a form or email you to make a purchase order, booking, etc.
  • By selling goods and/or services on auction, marketplace or similar sites operated by others.

If you earn income from advertising, income programs or traffic your site generates. This would include:

  • Static advertisements you place on your site for other businesses
  • Affiliate programs
  • Advertising programs such as GoogleAdSense or Microsoft adCentre, or
  • Other types of traffic programs

Enter the number of webpages and websites your business earns income from.

Enter the address(es) of your page(s) and/or site(s) in the fields provided. If you have more than five sites, enter the addresses of those that generate the most internet income.

If you don’t have a website but you have created a profile or other page describing your business on blogs, auction, market place or any other portal or directory site(s), then enter the address(es) of the page(s) if they generate income.

Enter the percentage of income generated from the Internet. If you do not know the exact percentage, provide an estimate.

Part 1 – Business income

Tick the box in Part 1 to show that you have non-professional business income.

You should complete this part only if you have business income. If you have professional income, leave this part blank and complete Part 2. If you have both business and professional income, you have to complete a separate Form T2125 for each.

Sales, commissions, or fees

Your sales include all sales, whether you receive or will receive money, something the same as money (such as credit units that have a notional monetary value), or something from bartering. Bartering occurs when two people agree to exchange goods or services without using money. For more information, see Interpretation Bulletin IT‑490, Barter Transactions.

On line A enter the gross sales, commissions, or fees (including GST/HST collected or collectible).

On line (i) enter any PST, GST/HST, returns, allowances, discounts included in sales, and GST/HST adjustments. Line B is the total of line A minus line (i).

Note

If you elected to use the Quick Method to calculate your GST/HST remittances, calculate government assistance as follows:

  • On line (ii) enter GST/HST collected or collectible on sales, commissions and fees eligible for the Quick Method;
  • For each applicable remittance rate, include (sales, commissions and fees eligible for the Quick Method plus GST/HST collected or collectible) multiplied by the Quick Method remittance rate (place this amount on line (iii)). This is the amount you entered on line 103 of your GST/HST return;
  • The subtotal at line (iv) is line (ii) minus line (iii).

For more information on the Quick Method and examples of how it works, see Guide RC4058, Quick Method of Accounting for GST/HST.

Line C (Adjusted gross sales) is the total of the amounts from line B plus line (iv).

Adjusted gross sales - Line C

Enter this amount on line 8000 in Part 3 of Form T2125.

Part 2 – Professional income

Tick the box in Part 2 to show that you have professional income.

You should complete this part only if you have professional income. If you have business income, leave this part blank and complete Part 1. If you have both professional and business income, you have to complete a separate Form T2125 for each.

As mentioned in Chapter 1, professional activities are business activities. Usually, you calculate your income from professional activities using the same rules as for a business. However, some aspects of professional activities are different from those of other types of businesses. Some of these differences are discussed in this section.

Professional fees

Your professional income includes all fees you receive for goods or services you provide, whether you receive or will receive money, something the same as money (such as credit units that have a notional monetary value), or something from bartering. Bartering occurs when two people agree to exchange goods or services without using money. For more information, see Interpretation Bulletin IT‑490, Barter Transactions.

As a professional, your income generally includes the value of your work-in-progress (WIP). WIP is goods or services that you have not yet finished providing at the end of your fiscal period.

Your professional fees for the current year are the total of:

  • all amounts you received during the year for professional services, whether you provided the services before or during the current year or after your current year-end;

Plus:

  • all amounts receivable at the end of the current year for professional services you provided during the current year; and
  • the value of your WIP at the end of your current year for which you have not received any amount during the year;

Minus:

  • all amounts receivable at the end of your previous year-end; and
  • the value of your WIP that was included in professional fees at the end of your previous year.

On line D enter the gross professional fees including WIP and GST/HST collected or collectible.

On line (i) enter any PST, GST/HST, returns, allowances, discounts included in the fees, GST/HST adjustments and WIP at the end of the year if you elected to exclude it. Line E is the total of line D minus line (i).

Note

If you elected to use the Quick Method option to calculate your GST/HST remittances, calculate government assistance as follows:

  • On line (ii) enter GST/HST collected or collectible on professional fees eligible for the Quick Method;
  • For each applicable remittance rate, include (professional fees eligible for Quick Method plus the GST/HST collected or collectible) multiplied by the Quick Method remittance rate (place this amount on line (iii). This is the amount that you entered on line 103 of your GST/HST return.
  • The subtotal at line (iv) is line (ii) minus line (iii).

For more information about the Quick Method and examples of how it works, see Guide RC4058, Quick Method of Accounting for GST/HST.

Add the WIP for the start of the year if you excluded it at the end of last year.

Line F (Adjusted professional fees) is the total of the amounts from line E plus lines (iv) and (v).

Election to exclude your WIP

You can choose to exclude your WIP when you calculate your income if you are one of the following professionals:

  • an accountant;
  • a dentist;
  • a lawyer (including a notary in Quebec);
  • a medical doctor;
  • a chiropractor; or
  • a veterinarian.

If you did not choose to exclude your WIP in any previous year, you can do so in 2013. You do not need a special form to do this. Attach a letter to your income tax return telling us that you want to exclude your WIP.

You can also exclude your WIP by doing the following:

  • On the "Work-in-progress (WIP), end of the year, per election to exclude WIP" line, write the amount you included as WIP at the end of the year in your professional fees on line D.
  • On the "Work-in-progress, start of the year, per election to exclude WIP" line, write the amount of your WIP at the start of the year, if you excluded it at the end of last year.

Make this election when you file the original income tax return to which it relates. If you are filing an amended return, you cannot make this election.

For partnerships, an authorized partner must choose to exclude the partnership's WIP on behalf of all partners.

The choice to exclude WIP stays in effect for each following year, unless you file an application and we let you make the change.

For more information about excluding WIP, see Interpretation Bulletin IT‑457, Election by Professionals to Exclude Work in Progress from Income.

Adjusted professional fees—Line F

Enter this amount on line 8000 in Part 3 of Form T2125.

Part 3 – Gross business or professional income

Line 8000 - Adjusted gross sales or adjusted professional fees

If you are completing Form T2125 for a business activity, enter your adjusted gross sales from line C in Part 1.

If you are completing Form T2125 for a professional activity, enter your adjusted professional fees from line F in Part 2.

Line 8290 - Reserves deducted last year

Include any reserves you deducted for 2012. For more information, see Allowable reserves.

Line 8230 - Other income

Enter the total income you received from other sources. Some examples of other income you would report on this line are:

  • a recovery of an amount you wrote off as a bad debt in a previous year;
  • the value of vacation trips or other prizes awarded to you because of your business or professional activities;
  • payments for land you leased for petroleum or natural gas exploration. For more information, see  Interpretation Bulletin IT‑200, Surface Rentals and Farming Operations; and
  • grants, subsidies, incentives, or assistance you get from a government, government agency, or non-government agency. Since input tax credits are considered government assistance, include on this line the amount you claimed on line 108 of your GST/HST return only if you cannot apply the rebate, grant, or assistance you received to reduce a particular expense or an asset's capital cost. For more information, see Grants, subsidies, and rebates. If you used the Quick Method to calculate your GST/HST remittances, report the 1% credit (maximum $300) that you claimed on line 107 of your GST/HST return. For more information, see Interpretation Bulletin IT‑273, Government Assistance – General Comments.
Note

Report the amount received in the year for the GST/HST rebate for partners that relates to eligible expenses other than CCA on line 9974 in Part 6 of Form T2125. See Part 6 – Your net income (loss).

Also, do not include in income any other rebate, grant, or assistance you receive, but subtract that amount from the applicable expense or the cost of capital property it relates to. If the rebate, grant, or assistance is for a depreciable asset, subtract the amount you received from the asset's capital cost. This will affect the amount of CCA you can claim for that asset. For information about CCA, see Chapter 4. If the asset qualifies for the investment tax credit, this reduction to the capital cost will also affect your claim for the investment tax credit. For more information, see Form T2038 (IND), Investment Tax Credit (Individuals).

Line 8299 - Gross business or professional income

Enter your gross business or professional income. This is your adjusted gross sales or adjusted professional fees (line 8000) plus any reserves deducted last year (line 8290) and any other income (line 8230). Enter this amount on the appropriate line of your income tax return.

Note

You have to register for the GST/HST if you provide taxable supplies in Canada and your total revenues from taxable supplies (before expenses) from all your businesses and those of your associates are more than $30,000 over the last four consecutive calendar quarters or in any single calendar quarter.

Part 4 – Cost of goods sold and gross profit

Complete this part if you have a business and your business buys goods for resale or makes goods for sale.

Claim the cost of the goods you buy or make for sale in the fiscal period in which you sell them. Enter only the business part of the costs on the form.

To calculate your cost of goods sold, you need to know the following:

  • the value of your inventory at the start of your fiscal period;
  • the value of your inventory at the end of your fiscal period; and
  • the cost of your purchases (net of discounts) for the fiscal period.

Line 8300 – Opening inventory and
Line 8500 – Closing inventory

Enter your opening and closing inventory on the appropriate lines. These amounts must include raw materials, goods in process, and finished goods. The way you value your inventory is important in determining your income. For income tax purposes, choose one of the following two methods:

  • value your entire inventory at its fair market value (FMV). Use either the price you would pay to replace an item or the amount you would get if you sold an item; or
  • value individual items in your inventory at either their FMV or their cost, whichever is less. Cost is the price you incur for an item. Cost also includes any expenses you incur to bring the item to the business location and put it in a condition so that you can use it in the business. When you cannot easily tell one item from another, you can value the items as a group.

Once you have chosen a method for valuing your inventory, you have to use that method consistently.

If this is your first year of reporting business income, you can choose either method to value your inventory. In your first year of business, you will not have an opening inventory amount to enter on line 8300. If this is not your first year of business, continue to use the same method you used in past years. The value of your inventory at the start of a fiscal period has to be the same as the value of your inventory at the end of the preceding fiscal period.

Do an actual stock count at the end of each fiscal period, unless you use a perpetual inventory system. Under this system, you do periodic stock counts and keep a written record of each count. Remember to keep your inventory records with your other records.

Businesses that are adventures or concerns in the nature of trade must value their inventory at cost.

For more information about valuing inventory, see Interpretation Bulletin IT‑473, Inventory Valuation.

Inventory value of an artistic endeavour

An artistic endeavour occurs when you are in the business of creating paintings, murals, original prints, etchings, drawings, sculptures, or similar works of art. An artistic endeavour does not include reproducing works of art.

When you calculate your income from an artistic endeavour, you can choose to value your closing inventory at nil. To do this, show your closing inventory as "nil" on line 8500. Your choice stays in effect for each following year, unless you request a change from the CRA and we allow the change. You cannot use this option if you did not create the work of art or if you are in the business of reproducing works of art.

For more information, see Interpretation Bulletin IT‑504-CONSOLID, Visual Artists and Writers.

Gifts of inventory by an artist

If you donate a work of art you created, you may not have to report a profit on your donation for income tax purposes. To benefit from this tax treatment, your gift must fall under the definition of gifts of certified cultural property. For more information about gifts and donations, see Pamphlet P113, Gifts and Income Tax.

Line 8320 - Purchases during the year (net of returns, allowances, and discounts)

The cost of goods you buy to resell or use in manufacturing other goods includes costs such as delivery, freight, and express charges. Enter the amount of your net purchases during the year (your total purchases minus any discounts you received).

Sometimes you might use goods you bought for the business for personal use. When this happens, you have to subtract the cost of these goods from your total purchases for the year. Do this before you enter the amount of the purchases.

Line 8340 - Direct wage costs

Include the remuneration you paid to employees who work directly in the manufacture of your goods. Do not include:

For more information, see Line 9060 - Salaries, wages, and benefits.

Line 8360 - Subcontracts

Enter all the costs of hiring outside help to perform tasks related to the goods you sell.

Line 8519 - Gross profit

Enter your gross profit, which is your gross business income (line 8299 in Part 3) minus your cost of goods sold (line 8518).

The following example summarizes this chapter. Since the rules for calculating business and professional income are similar, our example focuses on a business.

Example

Cathy is the sole proprietor of a fashion boutique that has a December 31 fiscal year-end. She rents the premises where the store is located. Cathy entered the following in her sales journals for 2013:

Total sales (excluding GST/HST or PST)
$189,000 
Returned items
$1,000 
Inventory at the start of 2013
$36,500 
Inventory at the end of 2013
$30,000 
Purchases (including freight and other expenses)
$88,000 

Cathy completes "Part 1 – Business income", "Part 3 – Gross business or professional income", and "Part 4 – Cost of goods sold and gross profit" on Form T2125 as follows:

Part 1 – Business income
If you have business income, tick this box and complete this part. Do not complete parts 1 and 2 on the same form.
Gross sales, commissions, or fees (including GST/HST) collected or collectible
$189,000.00 
Line A
Minus PST, GST/HST, returns, allowances, discounts included in sales, and GST/HST adjustments
$1,000.00 
Line (i)
Subtotal (line A minus line (i))
$188,000.00 
Line B
Plus (For those using the Quick Method) Government assistance calculated as follows: GST/HST collected or collectible on professional fees eligible for the Quick Method
$ Blank space for dollar value0
Line (ii)
For each applicable remittance rate, subtract (sales, commissions and fees eligible for the Quick Method plus GST/HST collected or collectible) multiplied by Quick Method remittance rate
$ Blank space for dollar value0
Line (iii)
Subtotal (line (ii) minus line (iii))
$ Blank space for dollar value0
Line (iv)
Adjusted gross sales (line B plus line (iv)) - Enter this amount on line 8000 in Part 3, below
$188,000.00 
Line C
Part 3 – Gross business or professional income
Adjusted gross sales (from line C in Part 1) or adjusted professional fees (from line F in Part 2)
Line 8000
$188,000.00 
Line G
Plus Reserves deducted last year
Line 8290
$ Blank space for dollar value0
Other income
Line 8230
$ Blank space for dollar value0
Total of the above two lines
$ Blank space for dollar value0
Line H
Gross business or professional income (line G plus line H)
Line 8299
$188,000.00 
Enter this amount on the appropriate line of your income tax and benefit return: business on line 162, professional on line 164, or commission on line 166.

If GST/HST has been remitted or an input tax credit has been claimed, do not include GST/HST in the calculation of cost of goods sold, expenses or net income (loss) in parts 4 to 6.

Part 4 – Cost of goods sold and gross profit

If you have business income, complete this part. Enter only the business part of the costs.

Gross business income from line 8299 in Part 3 
$188,000.00 
Line I
Opening inventory (include raw materials, goods in process, and finished goods)
Line 8300
$36,500.00 
Purchases during the year (net of returns, allowances, and discounts)
Line 8320
$88,000.00 
Direct wage costs
Line 8340
$ Blank space for dollar value0
Subcontracts
Line 8360
$ Blank space for dollar value0
Other costs
Line 8450
$ Blank space for dollar value0
Total of the above five lines
$124,500.00 
Minus - Closing inventory (include raw materials, goods in process, and finished goods)
Line 8500
$30,000.00 
Cost of goods sold
Line 8518
$94,500.00 
Line J
Gross Profit (line I minus line J)
Line 8519
$93,500.00 

Chapter 3 – Expenses

This chapter discusses the more common expenses you might incur to earn income from your business (including self-employed commission sales) or professional activities. Incur means that you paid or will have to pay the expense.

Current or capital expenses?

Renovations and expenses that extend the useful life of your property or improve it beyond its original condition are usually capital expenses. However, an increase in a property's market value because of an expense is not a major factor in deciding whether the expense is capital or current. To decide whether an amount is a current expense or a capital expense, consider your answers to the questions in the following chart:

Decide whether an amount is a current expense or a capital expense
CriteriaCapital expensesCurrent expenses
Does the expense provide a lasting benefit? 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.
Does the expense maintain or improve the property? The cost of a repair that improves a property beyond its original condition is probably a capital expense. If you replace wooden steps with concrete steps, the cost is a capital expense. An expense that simply restores a property to its original condition is usually a current expense. For example, the cost of repairing wooden steps is a current expense.
Is the expense for a part of a property or for a separate asset? The cost of replacing a separate asset within a property is a capital expense. For example, the cost of buying a compressor to use in your business operation is a capital expense. The reason is that a compressor is a separate asset and is not part of the building. The cost of repairing a property by replacing one of its parts is usually a current expense. For instance, electrical wiring is part of a building. Therefore, an amount you spend to rewire is usually a current expense, as long as the rewiring does not improve the property beyond its original condition.
What is the value of the expense? (Use this test only if you cannot determine whether an expense is capital or current by considering the three previous tests.) Compare the cost of the expense to the value of the property. Generally, if the cost is considerable in relation to the value of the property, it is a capital expense. This test is not a determining factor by itself. You might spend a large amount of money for maintenance and repairs to your property all at once. If this cost was for ordinary maintenance that was not done when it was necessary, it is a maintenance expense, and you can deduct it as a current expense.
Is the expense for repairs to the used property that you acquired made to put it in suitable condition for use? The cost of repairing used property that you acquired to put it in a suitable condition to use in your business is considered a capital expense even though in other circumstances it would be treated as a current operating expense. When the repairs are for ordinary maintenance of a property that you already had in your business, the expense is usually current.
Is the expense for repairs made to an asset in order to sell it? The cost of repairs made in anticipation of selling a property or as a condition of sale is regarded as a capital expense. When the repairs would have been made anyway, but a sale was negotiated during the course of the repairs or after their completion, the expense is considered current.

For more information, see Chapter 4 and  Interpretation Bulletin IT‑128, Capital Cost Allowance - Depreciable Property.

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 business or professional 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.

Note

When you claim the GST/HST you paid on your business expenses as an input tax credit, reduce the amounts of the business expenses you show on Form T2125 by the amount of the input tax credit. Do this when the GST/HST for which you are claiming the input tax credit was paid or became payable. Similarly, subtract any other rebate, grant, or assistance from the expense to which it applies. Enter the net figure on the proper line of Form T2125. Any such assistance you claim for the purchase of depreciable property used in your business will affect your claim for capital cost allowance (CCA). If you cannot apply the rebate, grant, or assistance you received to reduce a particular expense, or to reduce an asset's capital cost, include the total on line 8230, "Other income", in Part 3 of Form T2125. For more information, see Grants, subsidies, and rebates.

"Enter only the business part" means that you do not include any of the following in your expenses:

  • salary or wages (including drawings) paid to self, partner(s), or both;
  • cost of saleable goods or services that you, your family, or your partners and their families used (including items such as food, home maintenance, and business properties);
  • charitable donations and political contributions;
  • interest and penalties you paid on your income tax;
  • most life insurance premiums (for more information, see Line 8690—Insurance;
  • the part of expenses that can be attributed to the non-business use of business property; and
  • most fines and penalties imposed after March 22, 2004, under the law of Canada or a province or a foreign country.

Prepaid expenses

A prepaid expense is an expense you pay for ahead of time. Under the accrual method of accounting, claim any expense you prepay in the year or years in which you get the related benefit. For example, suppose your fiscal year-end is December 31 2013. On June 30, 2013, you prepay the rent on your store for a full year (July 1, 2013, to June 30, 2014). You can only deduct one-half of this rent as an expense in 2013. You deduct the other half as an expense in 2014.

For more information, see  Interpretation Bulletin IT‑417, Prepaid Expenses and Deferred Charges.

Part 5 – Net income (loss) before adjustments

Line 8521 - Advertising

You can deduct expenses for advertising, including advertising in Canadian newspapers and on Canadian television and radio stations. You can also include on this line any amount you paid as a finder's fee.

Certain 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.

Line 8523 - Meals and entertainment

The maximum amount you can claim for food, beverages, and entertainment expenses is 50% of either the amount you incur or an amount that is reasonable in the circumstances, whichever is less.

These limits also apply to the cost of your meals when you travel or go to a convention, conference, or similar event. However, special rules can affect your claim for meals in these cases. For more information, see Line 9200 – Travel and Convention expenses.

These limits do not apply if:

  • your business regularly provides food, beverages, or entertainment to customers for compensation (for example, a restaurant, hotel, or motel);
  • you bill your client or customer for the meal and entertainment costs, and you show these costs on the bill;
  • you include the amount of meal and entertainment expenses in an employee's income or would include them if the employee did not work at a remote or special work location; in addition, the amount cannot be paid or payable for a conference, convention, seminar, or similar event and the special work location must be at least 30 kilometres from the closest urban centre with a population of 40,000 or more (visit Statistics Canada);
  • you incur meal and entertainment expenses for a Christmas party or similar event, and you invite all your employees from a particular location (note that you are limited to six of these events each year);
  • the meal and entertainment expenses you incur are for a fund-raising event that was mainly for the benefit of a registered charity; or
  • you provide meals to an employee housed at a temporary work camp constructed or installed specifically to provide meals and accommodation to employees working at a construction site (note that the employee cannot be expected to return home daily).

Entertainment expenses include tickets and entrance fees to an entertainment or sporting event, gratuities, cover charges, and room rentals such as for hospitality suites.

For more information, see   Interpretation Bulletin IT‑518, Food, Beverages, and Entertainment Expenses.

As of 2011, 80% of expenses for food and beverages consumed by a long-haul truck driver during an eligible travel period are deductible.

An eligible travel period is a period of at least 24 continuous hours throughout which the driver is away from the municipality and metropolitan area that he or she resides in (the residential location) and is driving a long-haul truck that transports goods to, or from, a location that is beyond a radius of at least 160 kilometres from the residential location.

Self-employed foot and bicycle couriers and rickshaw drivers can deduct the cost of extra food and beverages they must consume in a normal working day (8 hours) because of the nature of their work. For 2006 and later tax years, you can claim a daily flat rate of $17.50.

If you are claiming this deduction you should be prepared to provide log books showing the days worked and the hours worked on each of these days during the tax year. The CRA may also ask for dispatch slips or other documents to support the days worked during the tax year.

If you want to claim more than the flat-rate amount, the CRA will also need:

  • supporting receipts for all food and beverages claimed; and
  • something that clearly shows the extra amount of food and beverages required because of the nature of your work, and how this amount exceeds what the average person would consume both in terms of cost and quantity.

Line 8590 - Bad debts

You can deduct an amount for a bad debt if:

  • you had determined that an account receivable is a bad debt in the year; and
  • you had already included the receivable in income.

For more information, see  Interpretation Bulletin IT‑442, Bad Debts and Reserves for Doubtful Debts.

Line 8690 - Insurance

You can deduct all ordinary commercial insurance premiums you incur on any buildings, machinery, and equipment you use in your business. For more information about claiming your motor vehicle insurance costs, see Line 9281 – Motor vehicle expenses. The insurance costs related to business use of work space in your home have to be claimed on line 9945, 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, you may be able to deduct a limited part of the premiums you paid. For more information, see  Interpretation Bulletin IT‑309, Premiums on Life Insurance Used as Collateral.

Line 8710 - Interest

You can deduct interest you 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. For more information, see Interest
  • 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.

Fees, penalties, or bonuses paid for a loan

You can deduct the fee you pay to reduce the interest rate on your loan. You can also deduct any penalty or bonus a financial institution charges you to pay off your loan before it is due. Treat the fee, penalty, or bonus as prepaid interest and deduct it over the remaining original term of your loan. For example, if the term of your loan is five years and in the third year you pay a fee to reduce your interest rate, treat this fee as a prepaid expense and deduct it over the remaining term of the loan. For more information, see Prepaid expenses.

Fees deductible over five years

You can deduct certain fees you incur when you get a loan to buy or improve your business property. These fees include:

  • application, appraisal, processing, and insurance fees;
  • loan guarantee fees;
  • loan brokerage and finder's fees; and
  • legal fees related to financing.

You deduct these fees over a period of five years, regardless of the term of your loan. Deduct 20% in 2013 and 20% in each of the next four years. The 20% limit is reduced proportionally for fiscal periods of less than 12 months.

However, if you repay the loan before the end of the five-year period, you can deduct the remaining financing fees then. The number of years for which you can deduct these fees is not related to the term of your loan.

Fees deductible in the year incurred

If you incur standby charges, guarantee fees, service fees, or any other similar fees, you may be able to deduct them in full in the year you incur them. To do so, they have to relate only to that year. For more information, see  Interpretation Bulletin IT‑341, Expenses of Issuing or Selling Shares, Units in a Trust, Interests in a Partnership or Syndicate, and Expenses of Borrowing Money.

Interest deductible on property no longer used for business purposes

You may be able to deduct interest expenses for a property you used for business purposes, even if you have stopped using the property for such purposes because you are no longer in business. For more information, see Information Bulletin IT‑533, Interest Deductibility and Related Issues.

Interest on loans made against insurance policies

You can deduct interest you paid on a loan made against an insurance policy, as long as the insurer did not add the interest you paid to the adjusted cost base of the insurance policy. To claim the interest you paid for 2013, have the insurer verify the interest before June 16, 2014, on Form T2210, Verification of Policy Loan Interest by the Insurer.

Capitalizing interest

You can choose to capitalize interest on money you borrow:

  • to buy depreciable property;
  • to buy a resource property; or
  • for exploration and development.

When you choose to capitalize interest, add the interest to the cost of the property or exploration and development costs instead of deducting the interest as an expense.

Interest related to work space in your home

The interest related to business use of work space in your home has to be claimed on line 9945, "Business-use-of-home expenses". For more information, see Business-use-of-home expenses.

Line 8760 - Business tax, fees, licences, dues, memberships, and subscriptions

You can deduct all annual licence fees and 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. You cannot deduct club membership dues (including initiation fees) if the main purpose of the club is dining, recreation, or sporting activities.

Line 8810 - Office expenses

You can deduct the cost of office expenses. These include small items such as pens, pencils, paper clips, stationery, and stamps. Office expenses do not include items such as calculators, filing cabinets, chairs, and desks. These are capital items. For more information on capital property, see Chapter 4.

Line 8811 - Supplies

You can deduct the cost of items the business used indirectly to provide goods or services (for example, drugs and medication used by a veterinarian, or cleaning supplies used by a plumber).

Line 8860 - Legal, accounting, and other professional fees

Deduct the fees you incurred for external professional advice or services, including consulting fees.

You can deduct accounting and legal fees you incur to get advice and help with keeping your records. You can also deduct fees you incur for preparing and filing your income tax and GST/HST returns.

You can deduct accounting or legal fees you paid to have an objection or appeal prepared against an assessment for income tax, Canada Pension Plan or Quebec Pension Plan contributions, or employment insurance premiums. However, the full amount of these deductible fees must first be reduced by any reimbursement of these fees that you have received. Report the difference on line 232 of your income tax return. If you received a reimbursement in 2013 for the types of fees that you deducted in a previous year, report the amount you received on line 130 of your 2013 income tax return.

You cannot deduct legal and other fees you incur to buy a capital property. Instead, add these fees to the cost of the property. For more information on capital property, see Chapter 4.

For more information, see Interpretation Bulletin IT‑99, Legal and Accounting Fees.

Line 8871 - Management and administration fees

You can deduct management and administration fees including bank charges incurred to operate your business. Do not include on this line employees' salaries, property taxes, or rents paid. You can claim these amounts at a different place on Form T2125.

Line 8910 - Rent

You can deduct rent incurred for property used in your business. For example, you can deduct rent for the land and building where your business is situated. The rent expense related to the business use of work space in your home has to be claimed on line 9945, "Business-use-of-home expenses". For more information, see Business-use-of-home expenses.

Line 8960 - Maintenance and repairs

You can deduct the cost of labour and materials for any minor repairs or maintenance done to property you use to earn income. However, you cannot deduct the value of your own labour.

You cannot deduct costs you incur for repairs that are capital in nature. However, you can claim CCA. For more information about CCA, see Chapter 4.

The maintenance and repairs related to business use of work space in your home have to be claimed on line 9945, "Business-use-of-home expenses". For more information, see Business-use-of-home expenses.

Line 9060 - Salaries, wages, and benefits

You can deduct gross salaries and other benefits you pay to employees. Do not include on this line salaries and wages described in Line 8340 – Direct wage costs, or Line 8360 – Subcontracts or salaries and drawings of the owner(s) of the business described in Line 9932 – Drawings in 2013. Salaries or drawings paid or payable to you or your partners are not deductible. For more information, see Details of equity.

The Canada Pension Plan (CPP) is for all workers, including the self-employed. Employers, employees, and most self-employed individuals have to contribute to the CPP. The CPP can provide basic benefits when you retire or if you become disabled. When you die, the CPP can provide benefits to your surviving spouse or common-law partner and your dependent children under the age of 25. For more information on contributions and benefits, visit the Service Canada website.

Quebec workers including the self-employed are covered under the Quebec Pension Plan (QPP).

As the employer, you can deduct your part of CPP or QPP contributions, employment insurance premiums, provincial parental insurance plan (PPIP) premiums (the PPIP is an income replacement plan for residents of Quebec – for details, contact Revenu Québec), and workers' compensation amounts payable on employees' remuneration. For information on making payroll deductions, go to Payroll.

You can also deduct any insurance premiums you pay for an employee for a sickness, an accident, a disability, or an income insurance plan.

You can deduct the salary you pay to your child, as long as you meet all these conditions:

  • you pay the salary;
  • the work your child does is necessary for earning business or professional income; and
  • the salary is reasonable when you consider your child's age, and the amount you pay is what you would pay someone else.

Keep documents to support the salary you pay your child. If you pay your child by cheque, keep the cancelled cheque. If you pay cash, have the child sign a receipt.

Instead of cash, you can pay your child with a product from your business. When you do this, claim the value of the product as an expense and add to your gross sales an amount equal to the value of the product. Your child has to include the value of the product in his or her income.

You can also deduct the salary you pay to your spouse or common-law partner. When you pay your spouse or common-law partner a salary, use the same rules that apply to paying your child.

Report the salaries you pay to your children and spouse or common-law partner on T4 slips, the same as you would for other employees. However, you cannot claim as an expense the value of board and lodging you provide to your dependent children and your spouse or common-law partner.

Line 9180 - Property taxes

You can deduct property taxes you incurred for property used in your business. For example, you can deduct property taxes for the land and building where your business is situated. The property tax related to the business use of work space in your home has to be claimed on line 9945, "Business-use-of-home expenses". For more information, see Business-use-of-home expenses.

Line 9200 - Travel

You can deduct travel expenses you incur to earn business and professional income. Travel expenses include public transportation fares, hotel accommodation, and meals.

In most cases, the 50% limit applies to the cost of meals, beverages, and entertainment when you travel. We discuss this limit in Line 8523 – Meals and entertainment.

The 50% limit also applies to the cost of food and beverages served and entertainment enjoyed when you travel on an airplane, train, or bus when the ticket price does not include such amounts.

Line 9220 - Telephone and utilities

You can deduct expenses for telephone and utilities, such as gas, oil, electricity, and water, if you incurred the expenses to earn income. The expenses for utilities that are related to the business use of work space in your home have to be claimed on line 9945, Business-use-of-home expenses.

Line 9224 - Fuel costs (except for motor vehicles)

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, see Line 9281 – Motor vehicle expenses. The cost of fuel related to the business use of work space in your home has to be claimed on line 9945, Business-use-of-home expenses.

Line 9275 - Delivery, freight, and express

You can deduct the cost incurred in the year of delivery, freight, and express that relates to your business.

Line 9281 - Motor vehicle expenses

You can deduct expenses you incur to run a motor vehicle you use to earn business income. Complete "Chart A - Motor vehicle expenses" of Form T2125. The chart will help you calculate the amount of motor vehicle expenses you can deduct. If you are a partner in a business partnership and you incur motor vehicle expenses for the business through the use of your personal vehicle, you can claim those expenses related to the business on line 9943, "Other amounts deductible from your share of net partnership income (loss)", in Part 6 of the form. For more information, see Line 9943 - Other amounts deductible from your share of net partnership income (loss).

Keeping records

You can deduct motor vehicle expenses only when they are reasonable and you have receipts to support them. To receive the full benefit of your claim for each vehicle, keep a record of the total kilometres you drive and the kilometres you drive to earn business income. For each business trip, list the date, destination, purpose, and number of kilometres you drive. Record the odometer reading of each vehicle at the start and end of the fiscal period.

If you change motor vehicles during the fiscal period, record the dates of the changes and the odometer readings when you buy, sell, or trade the vehicles.

Simplified logbook for motor vehicle expense provisions

Following a federal initiative to reduce the paper burden on businesses, you can choose to maintain a full logbook for one complete year to establish a base year's business use of a vehicle.

After one complete year of keeping a logbook (starting in 2009 or  later) to establish the base year, you can use a three -month sample logbook to foresee business use for the entire year, as long as the usage is within the same range (within 10%) of the results of the base year. Businesses will have to show that the use of the vehicle in the base year remains representative of its normal use.

For more information on the sample logbook policy, go to Documenting the use of a vehicle.

What type of vehicle do you own?

The kind of vehicle you own can affect the expenses you deduct. For income tax purposes, there are two types of vehicles:

  • motor vehicles; and
  • passenger vehicles.

If you own or lease a passenger vehicle, there may be a limit on the amounts you can deduct for CCA, interest, and leasing costs.

We explain the CCA limits in for passenger vehicles Class 10.1 (30%), the interest limits at Interest, and the leasing costs at Leasing costs for a passenger vehicle.

To help you determine what type of vehicle you have, see Vehicle definitions. The chart does not cover every situation, but it gives some of the main definitions to help you determine the type of vehicle you own.

The chart is for a vehicle you buy or lease after June 17, 1987, and use to earn business income.

Deductible expenses

The types of expenses you can claim on line 9281 include:

  • licence and registration fees;
  • fuel and oil costs;
  • insurance;
  • interest on money borrowed to buy a motor vehicle;
  • maintenance and repairs; and
  • leasing costs.

You can also claim CCA, but you enter this amount on line 9936. For information about CCA, see Chapter 4.

Business use of a motor vehicle

If you use a motor vehicle for business and personal use, you can deduct only the part of the expenses that you paid to earn income. However, you can deduct the full amount of parking fees related to your business activities and supplementary business insurance for your motor vehicle. To support the amount you can deduct, keep a record of the total kilometres you drive and the kilometres you drive to earn income.

Example

Paul owns a hardware store that has a December 31 year-end. He has a van that he uses for the business. Paul noted the following for 2013:

Kilometres driven to earn business income
27,000 km 
Total kilometres driven
30,000 km 
Expenses:
Licence and registration fees
$100 
Gas and oil
$2,400 
Insurance
$1,900 
Interest
$800 
Maintenance and repairs
$200 
Total expenses for the van
$5,400 

Paul calculates the expenses he can deduct for his van for 2013 as follows:

27,000 (business kilometres) ÷ 30,000 (total kilometres) × $5,400
= $4,860

The deductible business part of Paul's van expenses is $4,860. He also has business parking fees of $40 and a supplementary business insurance cost of $100. Therefore he can claim $5,000 on line 9281 in Part 5 of Form T2125.

Joint ownership

If you and another person own or lease a passenger vehicle, the limits on CCA, interest, and leasing still apply. As a joint owner, the total amount you and any other owners deduct cannot be more than the amount one person owning or leasing the vehicle could deduct.

More than one vehicle

If you use more than one motor vehicle for your business, keep a separate record for each vehicle that shows the total and business kilometres you drive, as well as the cost to run and maintain the vehicle. Calculate each vehicle's expenses separately.

For more information, see  Interpretation Bulletin IT‑521, Motor Vehicle Expenses Claimed by Self-Employed Individuals.

Vehicle definitions
Type of vehicleSeating (includes driver)Business use in year bought or leasedVehicle definition

Footnotes

Footnote 1

For more information, see Definitions.

Return to footnote 1 referrer

Footnote 2

A vehicle in this category that is used more than 50% to transport goods, equipment, or passengers while earning or producing income at a remote work location or at a special work site that is at least 30 kilometres from the nearest community with a population of 40,000 is considered a motor vehicle.

Return to footnote 2 referrer

Coupe, sedan, station wagon, sports car, or luxury car 1 to 9 1% to 100% passengerFootnote 1
Pickup truck used to transport goods or equipment 1 to 3 more than 50% motorFootnote 1
Pickup truck (other than above)Footnote 2 1 to 3 1% to 100% passenger
Pickup truck with extended cab used to transport goods, equipment, or passengers 4 to 9 90% or more motor
Pickup truck with extended cab (other than above)Footnote 2 4 to 9 1% to 100% passenger
Sport utility used to transport goods, equipment, or passengers 4 to 9 90% or more motor
Sport utility (other than above) 4 to 9 1% to 100% passenger
Van or minivan used to transport goods or equipment 1 to 3 more than 50% motor
Van or minivan (other than above) 1 to 3 1% to 100% passenger
Van or minivan used to transport goods, equipment, or passengers 4 to 9 90% or more motor
Van or minivan (other than above) 4 to 9 1% to 100% passenger

Interest

You can deduct interest on money you borrow to buy a motor vehicle, or passenger vehicle you use to earn income. Include the interest as an expense when you calculate your allowable motor vehicle expenses.

When you use a passenger vehicle to earn income, there is a limit on the interest you can deduct. To calculate the amount of interest you can deduct, complete "Chart B - Available interest expense for passenger vehicles" of Form T2125.

Example

On May 1, 2013, Julie bought a car that she uses to earn business income. Julie's fiscal year ends on December 31. The car is a passenger vehicle. Julie borrowed money to buy her car, and the interest payable in 2013 was $1,500. Her available interest expense is whichever is less:

  • the total interest payable in 2013 ($1,500); or
  • $10 multiplied by the number of days in the fiscal period that interest was payable ($10 × 245 days = $2,450).

Julie can claim an interest expense of $1,500.

She also recorded the following information for 2013:

Kilometres driven to earn business income
25,000 km 
Total kilometres driven
30,000 km 
Expenses:
Gasoline and oil
$1,330 
Interest expense
$1,500 
Insurance
$750 
Licence and registration fees
$70 
Repairs and maintenance
$100 
Total car expenses
$3,750 

Julie calculates the expenses she can deduct for her car for 2013 as follows:

25,000 (business kilometres) ÷ 30,000 (total kilometres) × $3,750
= 3,125

Leasing costs

You can deduct amounts you incur to lease a motor vehicle you use to earn income. Include these amounts on line 9281.

When you use a passenger vehicle to earn income, there is a limit on the amount of the leasing costs you can deduct. To calculate your eligible leasing costs, complete "Chart C - Eligible leasing costs for passenger vehicles" of Form T2125.

If the lease agreement for your passenger vehicle includes items such as insurance, maintenance, and taxes, include them as part of the lease charges on line 1 of Chart C.

Note

Generally, leases include taxes (GST/HST or PST), but not items such as insurance and maintenance. You have to pay these amounts separately. Include the taxes on line 1 of Chart C, and list the items such as insurance and maintenance on the appropriate lines of "Chart A - Motor vehicle expenses".

The GST/HST rate that you should use to complete "Chart C - Eligible leasing costs for passenger vehicles," of Form T2125 is the rate that was in effect at the start of each lease period.

For your 2013 fiscal period, use the GST rate of 5% or the HST rate of your specific province to complete Chart C.

To show you how to calculate your eligible leasing costs, complete the following example using Chart C of Form T2125.

Example

Kim owns a pet store. Her business has a July 31 fiscal year-end. On February 1, 2013, she started leasing a car that is a passenger vehicle. The PST rate for her province is 8% and the GST rate is 5%. Kim entered the following for 2013:

Monthly lease payment
$500 
 
Lease payments for 2013
$3,000 
 
Manufacturer's suggested list price
$33,000 
 
Number of days in 2013 she leased the car
$181 
 
GST and PST on $30,000
$3,900 
 
GST and PST on $35,294
$4,588 
 
GST and PST on $800
$104 
 
Total lease charges incurred in Kim's 2013 fiscal period for the vehicle
$3,000 
Line 1
Total lease payments deducted in her fiscal periods before 2013 for the vehicle
$0 
Line 2
Total number of days the vehicle was leased in 2013 and previous fiscal periods
$181 
Line 3
Manufacturer's list price
$33,000 
Line 4
The amount on line 4 or $39,882 ($35,294 + $4,588), whichever is more, multiplied by 85% ($39,882 × 85%)
$33,900 
Line 5
($904 × 181) ÷ 30
$5,454 
Line 6
($33,900 × $3,000) ÷ $33,900
$3,000 
Line 7

Kim's eligible leasing cost is either line 6 or line 7 whichever amount is less. In this case, her allowable claim is $3,000.

Repayments and imputed interest

When you lease a passenger vehicle, you may have a repayment owing to you, or you may have imputed interest. If so, you will not be able to use "Chart C - Eligible leasing costs for passenger vehicles" of Form T2125.

Imputed interest is interest that would be owing to you if interest were paid on money deposited to lease a passenger vehicle. You calculate imputed interest for leasing costs on a passenger vehicle only if all the following apply:

  • one or more deposits were made for the leased passenger vehicle;
  • the deposit(s) is/are refundable; and
  • the total of the deposit(s) is/are more than $1,000.

For more information, see Interpretation Bulletin IT‑521, Motor Vehicle Expenses Claimed by Self-Employed Individuals.

Line 9935 - Allowance on eligible capital property

If you buy a property such as goodwill or a franchise for your business, you may be able to claim an annual allowance. For more information, see Chapter 5.

Line 9936 - Capital cost allowance (CCA)

If you use a property you own such as a building, a motor vehicle, or equipment in your business, you might be able to claim CCA. For more information, see Chapter 4.

Line 9270 - Other expenses

There are expenses you can incur to earn income, other than those listed on Form T2125. We cover some of them in the following sections. Enter on this line the total of other expenses you incurred to earn income, as long as you did not include them on a previous line. You do not have to list these expenses on the form.

Disability-related modifications

You can deduct expenses you incur for eligible disability-related modifications made to a building in the year you paid them, instead of adding them to the capital cost of your building. Eligible disability-related modifications include changes you make to accommodate wheelchairs, such as:

  • installing hand-activated power door openers;
  • installing interior and exterior ramps; and
  • modifying a bathroom, an elevator, or a doorway.

You can also deduct expenses paid to install or get the following disability-related devices and equipment:

  • elevator car-position indicators (such as braille panels and audio indicators);
  • visual fire-alarm indicators;
  • telephone devices to help people that have a hearing impairment; and
  • listening devices for group meetings.

In addition, you may be able to deduct expenses for disability specific computer software and hardware attachments.

Computer and other equipment leasing costs

If you lease computers, cellular telephones, fax machines, and other equipment, you can deduct the percentage of the lease costs that reasonably relates to earning your business income. You can also deduct the percentage of airtime expenses for a cellular telephone that reasonably relates to earning your business income.

If you buy a computer, cellular telephone, fax machine, or other such equipment, you cannot deduct the cost. You can deduct CCA and interest you paid on money you borrowed to buy this equipment that reasonably relates to earning your business income. For more information on CCA, see Chapter 4.

Leasing costs

Deduct the lease payments you incurred in the year for property used in your business. If you lease a passenger vehicle, see Line 9281 - Motor vehicle expenses.

If you entered into a lease agreement after April 26, 1989, you can choose to treat your lease payments as combined payments of principal and interest. However, you and the person you are leasing from have to agree to treat the payments this way. In this case, we consider that you:

  • bought the property rather than leased it; and
  • borrowed an amount equal to the FMV of the leased property.

You can deduct the interest part of the payment as an expense. You can also claim CCA on the property.

You can make this choice as long as the property qualifies and the total FMV of all the property subject to the lease is more than $25,000. Digging equipment that you lease with an FMV of $35,000 is an example of property that qualifies. However, office furniture and passenger vehicles often do not qualify.

To treat your lease this way, file one of these forms with your income tax return for the year you make the lease agreement:

Convention expenses

You can deduct the cost of attending up to two conventions a year. The conventions have to:

  • relate to your business or professional activity; and
  • be held by a business or professional organization within the geographical area where the organization normally conducts its business.

This second limit may not apply if an organization from another country sponsors the convention and the convention relates to your business or professional activity.

Sometimes, convention fees include the cost of food, beverages, or entertainment. However, the convention organizer may not show these amounts separately on your bill. If this is the case, subtract $50 from the total convention fee for each day the organizer provides food, beverages, or entertainment.

You can deduct this daily $50 amount as a meal and entertainment expense. However, the 50% limit applies to the daily $50 amount. We discuss the 50% limit in Line 8523 - Meals and entertainment.

Example

Cathy attended a two-day convention in May 2013 that cost her $600. The organizer did not indicate what part of the $600 fee was for food and entertainment. Her convention expense is $500 [$600 - ($50 × 2)].

Cathy can also claim a meal and entertainment expense of $50 ($50 × 2 × 50%).

Food, beverages, or entertainment at a convention do not include incidental items such as coffee and doughnuts available at meetings or receptions at the convention.

For more information, see the Interpretation Bulletin IT‑131, Convention Expenses.

Allowable reserves

You can deduct an amount for a reserve, contingent account, or a sinking fund as long as the Income Tax Act allows it and the amount is reasonable. You can find more information about allowable reserves in the following recent publications:

Private health services plan (PHSP) premiums

You can deduct premiums paid or payable to a private health services plan (PHSP) if you meet the following conditions:

  • your net income from self-employment (excluding losses and PHSP deductions) for the current or previous year is more than 50% of your total income;Footnote1 or
  • your income from sources other than self-employmentFootnote2 is $10,000 or less for the current or previous year;
  • you are actively engaged in your business on a regular and continuous basis, individually or as a partner; and
  • the premiums are paid or payable to insure yourself, your spouse or common-law partner, or any member of your household.
Footnotes
Footnote 1

To make this claim; calculate your total income as follows:

  • the amount from line 150 of your 2012 or 2013 income tax return, whichever applies, before you deduct any amounts for PHSPs; minus
  • the amounts you entered on lines 207, 212, 217, 221, 229, 231, and 232 of your 2012 or 2013 income tax return, whichever applies.

Return to footnote 1 referrer

Footnote 2

To make this claim; calculate your income from sources other than self-employment as follows:

  • the amount from line 150 of your 2012 or 2013 income tax return, whichever applies, before you deduct any amounts for PHSPs; minus
  • the amounts you entered on lines 135, 137, 139, 141, 143 (excluding business losses that reduced the net amount reported on those lines), 207, 212, 217, 221, 229, 231, and 232 of your 2012 or 2013 income tax return, whichever applies.

Return to footnote 2 referrer

You cannot claim a deduction for PHSP premiums if another person deducted the amount, or if you or anyone else claimed the premiums as a medical expense. For your premiums to be deductible, your PHSP coverage has to be paid or payable under a contract with one of the following:

  • an insurance company;
  • a trust company;
  • a person or partnership in the business of administering PHSPs;
  • a tax-exempt trade union of which you or the majority of your employees are members; or
  • a tax-exempt business organization or tax-exempt professional organization of which you are a member.

For more information on PHSPs, see  Interpretation Bulletin IT‑339, Meaning of Private Health Services Plan.

For this claim, the following terms apply:

  • Arm's length employees are, generally, employees who are not related to you and not carrying on your business with you, for example, as your partners.
  • Qualified employees are arm's length, full-time employees who have three months' service since they last became employed with a business carried on by you, a business in which you are a majority interest partner, or a business carried on by a corporation affiliated with you. Temporary or seasonal workers are not qualified employees.
  • Insurable persons are people to whom coverage is extended and who are either:
    • qualified employees;
    • people who would be qualified employees if they had worked for you for three months; or
    • people carrying on your business (including yourself and your partners).

Note

All PHSP deduction limits, and calculated limits, must include all applicable taxes as part of the total dollar amount.

How to calculate your maximum deduction for PHSPs

The following sections explain how to calculate your maximum PHSP deduction based on whether you had employees and whether you insured them throughout the year or for part of the year. Find the section that describes your situation.

If you did not have any employees in 2013

Your PHSP deduction is restricted by an annual dollar limit. The limit is a maximum of:

  • $1,500 for yourself;
  • $1,500 for your spouse or common-law partner and each household member that is 18 years of age or older at the start of the period that they were insured; and
  • $750 for each household member under the age of 18 at the start of the period.

The maximum deduction is also limited by the number of days the person was insured. Calculate your allowable maximum for the year by using the following formula:

(A ÷ 365) × (B + C), where:

  • A is the number of days during the period of the year that you insured yourself and your household members, if applicable, but insured less than 50% of your employees;
  • B equals $1,500 × the number of people covered under the plan that includes you, your spouse or common-law partner, and your household members that are 18 years of age or older; and
  • C equals $750 × the number of household members under the age of 18 that were insured during the period.
Example 1

Edwin was a sole proprietor who ran his business alone in 2013. He had no employees and did not insure any of his household members. Edwin paid $2,000 for PHSP coverage in 2013. In his case, the coverage lasted from July 1 to December 31, 2013, a total of 184 days. Edwin's maximum allowable PHSP deduction is calculated as follows:

(184 ÷ 365) × $1,500 = $756

Even though Edwin paid $2,000 in premiums in 2013, he can only deduct $756 because the annual limit is $1,500 and he was only insured for about half of the year. If he had been insured for the entire year, his deduction limit would have been $1,500.

Example 2

Tony was a sole proprietor who ran his business alone in 2013. He had no employees. From January 1 to December 31, he insured himself, his wife, and his two sons. Tony paid $1,800 to insure himself, $1,800 to insure his wife, and $1,000 for each of his sons. One of his sons was 15 years old and the other turned 18 on September 1. Tony's PHSP deduction is limited to the following amounts:

  • $1,500 for himself;
  • $1,500 for his wife;
  • $750 for his 15-year old son; and
  • $750 for the son who turned 18. The $750 limit applies because he did not turn 18 until after the insured periods.
If you had employees throughout 2013

If you had at least one qualified employee throughout all of 2013, and at least 50% of the insurable persons in your business were qualified employees, your claim for PHSP premiums is limited in a different way. Your limit is based on the lowest cost of equivalent coverage for each of your qualified employees.

Use the following steps to calculate your maximum allowable claim for the PHSP premiums paid or payable for yourself, your spouse or common-law partner, and your household members.

For each of your qualified employees, do the following calculation:

X × Y = Z, where:

  • X equals the amount you would pay to provide yourself, your spouse or common-law partner, and your household members with coverage equal to that provided to a particular employee and his or her spouse or common-law partner and household members;
  • Y equals the percentage of the premium you pay for that particular employee; and
  • Z equals your limit based on that particular employee.

If you had more than one qualified employee, you have to do the X × Y = Z calculation for each employee. Your limit is the least of the amounts you calculate for each employee.

Example 1

You have one qualified employee. To provide yourself with coverage equivalent to his, you pay a premium of $1,800. You pay 60% of your employee's premium. Your deduction limit for yourself is $1,080, calculated as follows:

$1,800 (amount X) × 60% (amount Y) = $1,080 (amount Z).

The maximum you can claim is $1,080 if you had only one qualified employee.

Example 2

You have three qualified employees, Jack, Jill and Sue. The following table shows how much you would pay for coverage equivalent to each of theirs and the percentage of each employee's premium that you pay.

Cost of equivalent coverage for yourself and % of the employee's premiums you pay
Name of employeeCost of equivalent coverage for yourself (X)% of the employee's premium you pay (Y)
Jack $1,500 20%
Jill $1,800 50%
Sue $1,400 40%

You have to do X × Y = Z calculation three times:

For Jack: $1,500 × 20% = $300

For Jill: $1,800 × 50% = $900

For Sue: $1,400 × 40% = $560

Your limit is $300, the least of the amounts calculated for the three employees.

Note

If you have a qualified employee with no coverage, you cannot claim your PHSP premiums as a deduction from self-employment income. However, you may be able to claim them as medical expenses.

If you had employees throughout 2013, but the number of insurable arm's length employees was less than 50% of all the insurable persons in your business, your maximum allowable deduction is the lesser of the following two amounts:

Amount 1

Determine this amount by using the following formula:

A ÷ 365 × (B + C), where:

  • A is the number of days during the period of the year that you insured yourself and your household members, if applicable, but insured less than 50% of your employees;
  • B equals $1,500 × the number of people covered under the plan that includes you, your spouse or common-law partner, and your household members that are 18 years of age or older; and
  • C equals $750 × the number of household members under the age of 18 that were insured during the period.

Amount 2

If you had at least one qualified employee, amount 2 is the lowest cost of equivalent coverage for each qualified employee, calculated by using the X × Y = Z formula. If you did not have at least one qualified employee, the limit in Amount 1 will apply.

If you had employees for part of the year

For the part of the year that you had at least one qualified employee and your insurable arm's length employees represented at least 50% of all the insurable persons in your business, calculate your limit for that period by using the X × Y = Z formula from the previous section If you had employees throughout 2013.

For the rest of the year that you had no employees or that your insurable arm's length employees represented less than 50% of all of the insurable persons in your business, your deduction limit for that remaining period is the lesser of Amount 1 and Amount 2, calculated the same way as in the previous section.

Undeducted premiums

If you deduct only part of your PHSP premium on line 9270, and you paid the premium in the year, you can include the undeducted balance when you calculate your non-refundable medical expense tax credit. For more information, see Line 330 in your General Income Tax and Benefit Guide - 2013.

Line 9369 - Net income (loss) before adjustments

Enter on this line the gross income minus the deductible expenses. If you are a partner in a partnership, this amount is the net business income of all partners.

Part 6 – Your net income (loss)

On line M of Form T2125, enter your share of the amount on line 9369, "Net income (loss) before adjustments." This is the amount left after you subtract the amounts the other partners are responsible for reporting as specified in the partnership agreement.

Line 9974 - GST/HST rebate for partners received in the year

If you received a GST/HST rebate for partners, report the amount of the rebate that relates to eligible expenses other than CCA on line 9974 of Form T2125 in the year you receive it.

Enter the total of lines M and N on line O.

In the "Details of other partners," of Form T2125, show the full names and addresses of the other partners, as well as a breakdown of their shares of the net income or loss from line 9369 and their percentages of ownership shares in the partnership.

Line 9943 - Other amounts deductible from your share of net partnership income (loss)

If you are a partner in a business partnership and you incur motor vehicle expenses for the business using your personal vehicle, you can claim those expenses related to the business on this line. The expenses must not have been claimed anywhere else on the form.

Claim this amount only if the partnership did not repay you for these expenses. The limits discussed earlier in this chapter also apply to these expenses.

Complete the "Other amounts deductible from your share of net partnership income (loss)" of Form T2125 to list the other amounts you can deduct from your share of the partnership's net income or loss.

Line 9945 - Business-use-of-home expenses

You can deduct expenses for the business use of a work space in your home, as long as you meet one of the following conditions:

  • it is your principal place of business; or
  • you use the space only to earn your business income, and you use it on a regular and ongoing basis to meet your clients, customers, or patients.

You can deduct part of your maintenance costs such as heat, home insurance, electricity, and cleaning materials. You can also deduct part of your property taxes, mortgage interest, and CCA. To calculate the part you can deduct, use a reasonable basis such as the area of the work space divided by the total area of your home.

If you use part of your home for both your business and personal living, calculate how many hours in the day you use the rooms for your business, and then divide that amount by 24 hours. Multiply the result by the business part of your total home expenses. This will give you the household cost you can deduct. If you run the business for only part of the week or year, reduce your claim accordingly.

For more information, see Interpretation Bulletin IT‑514, Work Space in Home Expenses.

Example

Monique runs a business in her home weekdays from 7:00 a.m. to 5:00 p.m. (10 hours out of a 24-hour day). The business uses an area of 35 square metres. The house is 100 square metres, and the annual household expenses are $5,800.

The calculation is as follows:

10/24 hours × 35/100 metres × $5,800 expenses = $845.83

The business operates 5 days a week, so Monique has to do another calculation:

$845.83 × 5/7 days = $604.16

Monique can deduct a total of $604.16 for household expenses.

The capital gain and recapture rules will apply if you deduct CCA on the business-use part of your home and you later sell your home. For more information about these rules, see Chapter 4.

If you rent your home, you can deduct the part of the rent and any expenses you incur that relate to the work space.

The amount you can deduct for business-use-of-home expenses cannot be more than your net income from the business before you deduct these expenses. In other words, you cannot use these expenses to increase or create a business loss. You can deduct the lesser of the following amounts:

  • any amount you carried forward from 2012, plus the business-use-of-home expenses you incur in 2013; or
  • the amount on line Q of Form T2125.

In your next fiscal period, you can use any expense you could not deduct in 2013, as long as you meet one of the two previous conditions. You also use the same rules.

You can use the chart "Calculation of business-use-of-home expenses" of Form T2125 to calculate your allowable claim for business-use-of-home expenses. Enter on line 9945 your share of the amount on line 3 in the chart. The expenses you claim on line 9945 cannot be claimed anywhere else on Form T2125.

The following example will help you understand how to calculate your business-use-of-home expenses.

Example

Bill runs a bookkeeping business out of his home. His business has a December 31 fiscal year-end. Bill recorded the following for 2013:

Total house area (square metres)
180 
Area for business use only (square metres)
18 
Area for personal use (square metres)
162 
Net business income (loss) after adjustments
$7,100 
Business-use-of-home expenses carried forward from 2012
$150 
Bill's home expenses for 2013:
Heat
$1,200 
Electricity
$1,000 
Insurance
$650 
Maintenance
$350 
Mortgage interest
$8,000 
Property taxes
$1,800 
Water
$300 

Bill completes the "Calculation of business-use-of home-expenses," chart of Form T2125 as follows:

Calculation of business-use-of-home expenses
Heat
1,200.00 
 
Electricity
1,000.00 
 
Insurance
650.00 
 
Maintenance
350.00 
 
Mortgage interest
8,000.00 
 
Property taxes
1,800.00 
 
Other expenses (specify)
300.00 
 
Subtotal
13,300.00 
 
Minus: Personal use part
11,970.00 
 
Subtotal
1,330.00 
 
Plus: Capital cost allowance (business part only)
0.00 
 
Amount carried forward from previous year
150.00 
 
Subtotal
1,480.00 
Line 1
Minus: Net income (loss) after adjustments (from line Q in Part 6) - if negative, enter "0"
7,100.00 
Line 2
Business-use-of-home expenses available to carry forward (line 1 minus line 2) - if negative, enter "0"
0.00 
 
Allowable claim (the lesser of amounts 1 or 2 above) - enter your share of this amount on line 9945 in Part 6
1,480.00 
Line 3

Line 9946 - Your net income (loss)

On the relevant lines of your income tax return, enter your total gross (from line 8299 in Part 3) and total net business or professional income or loss (from line 9946 in Part 6. Include the total income or losses from all your business and professional activities (the total of these lines from all completed T2125 forms).

If you have a business or professional loss that is more than all your other sources of income, you may have a non-capital loss for the year. To apply this loss against income from previous years, complete Form T1A, Request for Loss Carryback, and attach a copy of it to your income tax return. For more information about loss carrybacks, see  Interpretation Bulletin IT‑232, Losses - Their Deductibility in the Loss Year or in Other Years.

Note

You may have to adjust the figure from line 9946 before entering it on your income tax return. You may have filed Form T1139, Reconciliation of Business Income for Tax Purposes, with your 2012 income tax return. If so, you will probably have to complete the same form for 2013. To find out if you have to file Form T1139, and to calculate the amount of income to report on your 2013 income tax return, see Guide RC4015, Reconciliation of Business Income for Tax Purposes. The guide includes Form T1139.

Details of other partners

If you are a partner in a partnership that does not have to file a partnership information return (see Chapter 1 for these requirements), complete the "Details of other partners" chart of Form T2125.

If you are a partner in a partnership that must file a partnership information return, do not complete this chart.

Details of equity

If you are a partner in a partnership that must file a partnership information return, do not complete the "Details of equity" section of Form T2125.

Line 9931 - Total business liabilities

A liability is a debt or obligation of a business. Total business liabilities are the total of all amounts your business or professional activity owes at the end of its fiscal period.

Total business liabilities include:

  • accounts payable;
  • notes payable;
  • taxes payable;
  • unpaid salaries, wages, and benefits;
  • interest payable;
  • deferred or unearned revenues;
  • loans payable;
  • mortgages payable; and
  • any other outstanding balances related to the business.

Line 9932 - Drawings in 2013

A drawing is any withdrawal of cash (including salaries), other assets, or services of a business by the proprietor or partners. This includes transactions by the proprietor or partners (or family members) such as withdrawing cash for non-business use, and using business assets or services for personal use. Include the cost or value of the personal use of business assets or services in your drawings for the year.

Line 9933 - Capital contributions in 2013

A capital contribution is cash or other assets you added to the business during its fiscal period. This includes personal funds you added to the business account, business debts you paid with personal funds, and personal assets you transferred to the business.

Chapter 4 – Capital cost allowance (CCA)

What is CCA?

You might acquire a depreciable property, such as a building, furniture, or equipment, to use in your business or professional activities. You cannot deduct the cost of the property when you calculate your net business or professional income for the year.

However, since these properties wear out or become obsolete over time, you can deduct their cost over a period of several years. The deduction for this is called CCA.

You can usually claim CCA on a property only when it becomes available for use.

Available for use rules

Property other than a building usually becomes available for use on the earlier of:

  • the date you first use it to earn income;
  • the second tax year after the year you acquire the property;
  • the time just before you dispose of the property; or
  • the time the property is delivered or made available to you and is capable of producing a saleable product or service.

A building or part of a building usually becomes available for use on the earlier of:

  • the date you start using 90% or more of the building in your business;
  • the second tax year after the year you acquire the building; or
  • the time just before you dispose of the building.

A building that you are constructing, renovating, or altering usually becomes available for use on the earlier of:

  • the date you complete the construction, renovation, or alteration;
  • the date you start using 90% or more of the building in your business;
  • the second tax year after the year you acquire the building; or
  • the time just before you dispose of the building.

How much CCA you can claim

The CCA you can claim depends on the type of property you own and the date you acquired it. Group the depreciable property you own into classes. A specific rate of CCA generally applies to each class.

We explain the most common classes of property in Classes of depreciable property. We list most of the classes and their rates in the CCA classes of commonly used business assets chart.

Base your CCA claim on your fiscal period ending in 2013, and not on the calendar year.

Basic information about CCA

  • To decide whether an amount is a current expense or a capital expense, see the chart in Chapter 3 – Expenses.
  • Generally, use the declining balance method to calculate your CCA. This means that you claim CCA on the capital cost of the property minus the CCA you claimed in previous years, if any. The balance declines over the years as you claim CCA.
Example

Last year Sue bought a building for $60,000 to use in her business. On her income tax return for last year, she claimed CCA of $1,200 on the building. This year, Sue bases her CCA claim on her balance of $58,800 ($60,000 - $1,200).

You were asking?

Q. How do I calculate my CCA claim if I start a business and my first fiscal period is from June 1, 2013, to December 31, 2013?

A. If your fiscal period is less than 365 days, you have to prorate your CCA claim. Calculate your claim using the rules we discuss in this chapter. However, base your CCA claim on the number of days in your fiscal period compared to 365 days.

In this case, your fiscal period is 214 days. Suppose you calculate your CCA to be $3,500. The amount of CCA you can claim is $2,052 ($3,500 × 214/365).

For more information, see  Interpretation Bulletin IT‑285, Capital Cost Allowance - General Comments.

How to calculate your CCA

To calculate your 2013 deduction for CCA, and any recaptured CCA and terminal losses, use Area A of your Form T2125. For 2013, you can get information to help you complete Area A from other areas of the Form T2125 you filed for 2012.

You may have acquired or disposed of buildings or equipment during your fiscal period. If so, complete the applicable Area B, C, D, or E, whichever applies, before completing Area A.

We explain how to complete Area B and Area C in Column 3 - Cost of additions in the year. We explain how to complete Area D and Area E in Column 4 - Proceeds of dispositions in the year.

Note

Even if you are not claiming a deduction for CCA for 2013, complete the appropriate areas of the form to show any additions and dispositions during the year.

Column 1 - Class number

Enter in this column the class numbers of your properties. If this is the first year you are claiming CCA, Column 3 - Cost of additions in the year before completing column 1. If you claimed CCA last year, you can get the class numbers of your properties from last year's form.

We discuss the more common types of depreciable properties in Classes of depreciable property, and we list most of the classes and their rates in the chart CCA classes of commonly used business assets.

Column 2 - Undepreciated capital cost (UCC) at the start of the year

If this is the first year you are claiming CCA, skip this column. Otherwise, enter in this column the UCC for each class at the end of last year. Enter the amounts from column 10 of your 2012 form.

From your UCC at the start of 2013, subtract any investment tax credit you claimed or were refunded in 2012. Also subtract any 2012 investment tax credit you carried back to a year before 2012.

You may have received in 2011 a GST/HST input tax credit for a passenger vehicle you used less than 90% for your business. In this case, subtract the amount of the credit you got from your 2013 opening UCC. See Grants, subsidies, and rebates.

Note

In 2013, you may be claiming, carrying back, or getting a refund of an investment tax credit. If you still have depreciable property in the class, you have to adjust, in 2014, the UCC of the class to which the property belongs. To do this, subtract the amount of the credit from the UCC at the start of 2014. When there is no property left in the class, report the amount of the investment tax credit as income in 2014.

Column 3 - Cost of additions in the year

If you acquire or make improvements to depreciable property in the year, we consider them to be additions to the class in which the property belongs. You should:

  • complete Area B and Area C of your Form T2125 as explained later; and
  • enter, in column 3 of Area A for each class, the figure from column 5 of each class in Area B and Area C.

If a chart asks for the personal part of a property, this refers to the part that you use personally, separate from the part you use for business. For example, if you use 25% of the building you live in for business, your personal part is the other 75%.

Do not include the value of your labour in the cost of a property you build or improve. Include the cost of surveying or valuing a property you acquire. Remember that a property usually has to be available for use before you can claim CCA.

If you received insurance proceeds to reimburse you for the loss or destruction of depreciable property, enter the amount you spent to replace the property in column 3 of Area A, as well as in Area B or Area C, whichever applies. Include the amount of insurance proceeds considered as proceeds of disposition in column 4 of Area A, as well as in Area D or Area E, whichever applies.

If you replace a lost or destroyed property, special rules for replacement property may apply. The replacement property must be acquired within two years of the end of the taxation year in which it was lost or destroyed. For more information, see  Interpretation Bulletin IT‑259, Exchange of Property, and Interpretation Bulletin IT‑491, Former Business Property, and its Special Release.

To find out if any of these special situations apply, see Special situations.

Area B - Details of equipment additions in the year

List the details of all equipment (including motor vehicles) you acquired or improved in 2013. Group the equipment into the applicable classes, and put each class on a separate line.

Equipment includes items you acquire to use in your business or professional activities to earn income or for maintenance. Examples include a cement mixer, a snow blower, and a lawn mower.

Enter on line 9925 the total business part of the cost of the equipment.

Area C - Details of building additions in the year

List the details of all buildings you acquired or improved in 2013. Group the buildings into the applicable classes, and put each class on a separate line.

Enter on line 9927 the total business part of the cost of the buildings. The cost includes the purchase price of the building and any related expenses you should add to the capital cost of the building, such as legal fees, land transfer taxes, and mortgage fees.

Land

Generally, land is not a depreciable property. Therefore, you cannot usually claim CCA on its cost. If you acquire a property that includes both land and a building, enter in column 3 of Area C only the cost that relates to the building. To calculate the building's capital cost, you have to split any fees that relate to buying the property between the land and the building. Related fees may include legal and accounting fees.

Calculate the part of the related fees you can include in the capital cost of the building as follows:

Building value ÷ total purchase price × legal, accounting, or other fees = the part of the fees you can include in the building's cost

You do not have to split a fee if it relates specifically to the land or the building. In this case, you would add the amount of the fee to the cost to which it relates; either the land or the building.

Area F - Details of land additions and dispositions in the year

Enter on line 9923 the total cost of acquiring land in 2013. The cost includes the purchase price of the land plus any related expenses you should add to the capital cost of the land, such as legal fees, land transfer taxes, and mortgage fees.

You cannot claim CCA on land. Do not enter this amount in column 3 of Area A.

Column 4 - Proceeds of dispositions in the year

Enter the details of your 2013 dispositions on your Form T2125 as explained below.

If you disposed of a depreciable property during your 2013 fiscal period, enter in column 3 of the appropriate dispositions area (Area D or Area E) one of the following amounts, whichever is less:

  • your proceeds of disposition minus any related expenses; or
  • the capital cost of the property.
Note

If a chart asks for the personal part of a property, which refers to the part that you use personally, separate it from the part you use for business. For example, if you use 25% of the building you live in for business, your personal part is the other 75%.

For each class copy the numbers from column 5 in Area D and Area E to column 4 of Area A.

If you received insurance proceeds to reimburse you for the loss or destruction of depreciable property, enter the amount you spent to replace the property in column 3 of Area A, as well as in Area B or Area C, whichever applies. Include the amount of insurance proceeds considered as proceeds of disposition in column 4 of Area A, as well as in Area D or Area E, whichever applies. This could include compensation you receive for property that someone destroys, expropriates, steals, or damages.

If you sell a property for more than it cost, you will have a capital gain. You may be able to postpone or defer adding a capital gain or recapture of CCA to income. For more information, Capital gains and Replacement property.

If you replaced a lost or destroyed property within a year of the loss, special rules for replacement property may apply. See   Interpretation Bulletin IT‑259, Exchange of Property, and  Interpretation Bulletin IT‑491, Former Business Property, and its Special Release.

For more information about proceeds of disposition, see   Interpretation Bulletin IT‑220, Capital Cost Allowance – Proceeds of Disposition of Depreciable Property, and its Special Release, and recent  Interpretation Bulletin IT‑285, Capital Cost Allowance – General Comments.

Area D - Details of equipment dispositions in the year

List in this chart the details of all equipment (including motor vehicles) you disposed of in your 2012 fiscal period. Group the equipment into the applicable classes, and put each class on a separate line. Enter on line 9926 the total business part of the proceeds of disposition of the equipment.

Area E - Details of building dispositions in the year

List in this chart the details of all buildings you disposed of in your 2013 fiscal period. Group the buildings into the applicable classes, and put each class on a separate line. Enter on line 9928 the total business part of the proceeds of disposition of the buildings.

Area F - Details of land additions and dispositions in the year

Enter on line 9924 the total of all amounts you received or will receive for disposing of land in the fiscal period.

Column 5 - UCC after additions and dispositions

You cannot claim CCA when the amount in column 5 is:

  • negative (see Recapture of CCA); or
  • positive and you do not have any property left in that class at the end of your 2013 fiscal period (see Terminal loss).

In either case, enter "0" in column 10.

Recapture of CCA

If the amount in column 5 is negative, you have a recapture of CCA. Include your recapture in your income on line 8230, "Other income," in Part 3 of your Form T2125. A recapture of CCA can happen if the proceeds from the sale of depreciable property are more than the total of:

  • the UCC of the class at the start of the period; and
  • the capital cost of any new additions during the period.

A recapture of CCA can also occur, for example, when you get a government grant or claim an investment tax credit.

In some cases, you may be able to postpone a recapture of CCA. For example, you may sell a property and replace it with a similar one, someone may expropriate your property, or you may transfer property to a corporation or a partnership.

Terminal loss

If the amount in column 5 is positive and you no longer own any property in that class, you may have a terminal loss. More precisely, you may have a terminal loss when, at the end of a fiscal period, you have no more property in the class but still have an amount you have not deducted as CCA. You can usually subtract this terminal loss from your gross business or professional income in the year you disposed of the depreciable property. Enter your terminal loss on line 9270, "Other expenses," in Part 5 of your Form T2125.

For more information on recapture of CCA and terminal loss, see   Interpretation Bulletin IT‑478, Capital Cost Allowance - Recapture and Terminal Loss.

Note

The rules for recapture of CCA and terminal loss do not apply to passenger vehicles in Class 10.1. To calculate your CCA claim, see the comments in Column 7 - Base amount for CCA.

Column 6 - Adjustment for current-year additions

In the year you acquire or make additions to a property, you can usually claim CCA on half of your net additions (the amount in column 3 minus the amount in column 4). We call this the half-year rule.

Calculate your CCA claim only on the net adjusted amount. Do not reduce the cost of the additions in column 3 or the CCA rate in column 8. For example, if you acquired a property in your 2013 fiscal period for $30,000, you would base your CCA claim on $15,000 ($30,000 × 50%).

If you acquired and disposed of depreciable property of the same class in your 2013 fiscal period, the calculation in column 6 restricts your CCA claim. Calculate the CCA you can claim as follows:

  • Determine which of the following amounts is less:
    • the proceeds of disposition of the property sold, minus any related costs or expenses; or
    • the capital cost.
  • Subtract the above amount from the capital cost of your addition.
  • Enter 50% of the result in column 6. If the result is negative, enter "0."

In some cases, you do not make an adjustment in column 6. For example, in a non-arm's length transaction, you may buy depreciable property that the seller continuously owned from the day that is at least 364 days before the end of your 2013 fiscal period to the day the property was purchased. However, if you transfer personal property, for example, a car or a personal computer, into your business, the half-year rule applies to the particular property transferred.

Also, some properties are not subject to the half-year rule. Some examples are those in classes 13, 14, 23, 24, 27, 34, and 52, as well as some of those in Class 12, such as small tools. The half-year rule does not apply when the available for use rules deny a CCA claim until the second tax year after the year you acquire the property.

For more information on the special rules that apply to Class 13, see   Interpretation Bulletin IT‑464, Capital Cost Allowance - Leasehold Interests. For more information on the half-year rule, see   Interpretation Bulletin IT‑285, Capital Cost Allowance - General Comments.

Column 7 - Base amount for CCA

Base your CCA claim on this amount.

For a Class 10.1 vehicle you disposed of in your 2013 fiscal period, you may be able to claim 50% of the CCA that would be allowed if you still owned the vehicle at the end of your 2013 fiscal period. This is known as the half-year rule on sale.

You can use the half-year rule on sale if, at the end of your 2012 fiscal period, you owned the Class 10.1 vehicle you disposed of in 2013. If this applies to you, enter 50% of the amount from column 2 in column 7.

Column 8 - Rate (%)

In this column, enter the rate for each class of property in Area A. For more information on certain kinds of property, see Classes of depreciable property. For a more complete list of classes and rates, see the CCA classes of commonly used business assets chart.

Column 9 - CCA for the year

In column 9, enter the CCA you want to deduct for 2013. The CCA you can deduct cannot be more than the amount you get when you multiply the amount in column 7 by the rate in column 8. You can deduct any amount up to the maximum.

If this is your first year of business, you may have to prorate your CCA claim. See You were asking?

Add up all the amounts in column 9. Enter the total on line 9936, "Capital cost allowance (CCA)," in Part 5 of Form T2125. To find out how to calculate your CCA claim if you are using the property for business and personal use, see Personal use of property.

Column 10 - UCC at the end of the year

This is the undepreciated capital cost (UCC) at the end of your 2013 fiscal period. This is the amount you will enter in column 2 when you calculate your CCA claim next year.

Enter "0" in column 10 if you have a terminal loss or a recapture of CCA. There will not be an amount in column 10 for a Class 10.1 passenger vehicle you dispose of in the year.

Classes of depreciable property

In this part, we discuss the more common classes of depreciable property. We also list most of the classes and their rates in the CCA classes of commonly used business assets chart

Class 1 (4%)

A building may belong to class 1, 3, or 6, depending on what the building is made of and the date you acquired it. You also include in these classes the parts that make up the building, such as:

  • electrical wiring;
  • lighting fixtures;
  • plumbing;
  • sprinkler systems;
  • heating equipment;
  • air-conditioning equipment (other than window units);
  • elevators; and
  • escalators.
Note

Most land is not depreciable property. Therefore, when you acquire property, only include the cost that relates to the building in Area A and Area C. Enter on line 9923 in Area F of Form T2125 the cost of all land additions in 2013. For more information, see Area F - Details of land additions and dispositions in the year and Column 3 - Cost of additions in the year.

For more information, see   Interpretation Bulletin IT‑79, Capital Cost Allowance – Buildings or Other Structures.

Class 1 includes most buildings acquired after 1987, unless they specifically belong in another class. Class 1 also includes the cost of certain additions or alterations you made to a Class 1 building or certain buildings of another class after 1987.

The CCA rate for eligible non-residential buildings acquired by a taxpayer after March 18, 2007, and used in Canada to manufacture or process goods for sale or lease includes an additional allowance of 6% for a total rate of 10%. The CCA rate for other eligible non-residential buildings includes an additional allowance of 2% for a total rate of 6%.

To be eligible for one of the additional allowances, you must elect to put a building in a separate class. To make the election, attach a letter to your return for the tax year in which you acquired the building. If you do not file an election to put it in a separate class, the 4% rate will apply.

The additional allowance applies to buildings acquired after March 18, 2007 (including a new building, if any part of it is acquired after March 18, 2007, when the building was under construction on March 19, 2007) that have not been used or acquired for use before March 19, 2007.

To be eligible for the 6% additional allowance, at least 90% of a building (measured by square footage) must be used in Canada for the designated purpose at the end of the tax year. Manufacturing and processing buildings that do not meet the 90% use test will be eligible for the additional 2% allowance if at least 90% of the building is used in Canada for non-residential purposes at the end of the tax year.

Class 3 (5%)

Most buildings acquired before 1988 are included in Class 3 or Class 6.

If you acquired a building before 1990 that does not fall into Class 6, you can include it in Class 3 with a CCA rate of 5% if one of the following applies:

  • you acquired the building under the terms of a written agreement entered into before June 18, 1987; or
  • the building was under construction by you or for you on June 18, 1987.

Include in Class 3 the cost of any additions or alterations made after 1987 to a Class 3 building that does not exceed the lesser of the following two amounts:

  • $500,000; and
  • 25% of the building's capital cost (including the cost of additions or alterations to the building included in Class 3, Class 6, or Class 20 before 1988).

Any amount that exceeds the lesser amount above is included in Class 1.

Class 6 (10%)

Include in Class 6 with a CCA rate of 10% a building if it is made of frame, log, stucco on frame, galvanized iron, or corrugated metal. In addition, one of the following conditions has to apply:

  • you acquired the building before 1979;
  • the building is used to gain or produce income from farming or fishing; or
  • the building has no footings or other base supports below ground level.

If any of the above conditions apply, you also add the full cost of all additions and alterations to the building to Class 6.

If none of the above conditions apply, include the building in Class 6 if one of the following conditions applies:

  • you entered into a written agreement before 1979 to acquire the building, and the footings or other base supports of the building were started before 1979; or
  • you started construction of the building before 1979 (or it was started under the terms of a written agreement you entered into before 1979), and the footings or other base supports of the building were started before 1979.

Also include in Class 6, certain greenhouses and fences.

For additions or alterations to such a building:

  • Add to Class 6:
    • the first $100,000 of additions or alterations made after 1978.
  • Add to Class 3:
    • the part of the cost of all additions or alterations over $100,000 made after 1978 and before 1988; and
    • the part of the cost of additions or alterations over $100,000 made after 1987, but only up to $500,000 or 25% of the building's capital cost, whichever is less.
  • Add to Class 1 any additions or alterations over these limits.

For more information, see   Interpretation Bulletin IT‑79, Capital Cost Allowance - Buildings or Other Structures.

Class 8 (20%)

Class 8 with a CCA rate of 20% includes certain property that is not included in another class. Examples are furniture, appliances, and tools costing $ 500 or more per tool, some fixtures, machinery, outdoor advertising signs, refrigeration equipment, and other equipment you use in business.

Photocopiers and electronic communications equipment, such as fax machines and electronic telephone equipment are also included in Class 8.

Note

If this equipment costs $1,000 or more, you can elect to have it included in a separate class. The CCA rate will not change but a separate CCA deduction can now be calculated for a five year period. When all the property in the class is disposed of, the UCC is fully deductible as a terminal loss. Any UCC balance remaining in the separate class at the end of the fifth year has to be transferred back to the general class in which it would otherwise belong. To make an election, attach a letter to your income tax return for the tax year in which you acquired the property.

Include in Class 8 data network infrastructure equipment and systems software for that equipment acquired before March 23, 2004. If acquired after March 22, 2004, include it in Class 46. See Class 46 (30%).

Include buildings that you use to store fresh fruit or vegetables at a controlled temperature, by or for the person or persons by whom they were grown, in Class 8 instead of Class 1, Class 3, or Class 6. Also include in Class 8 any buildings that you use to store silage.

Class 10 (30%)

Include in Class 10 with a CCA rate of 30% general-purpose electronic data processing equipment (commonly called computer hardware) and systems software for that equipment, including ancillary data processing equipment, if you acquired them:

  • before March 23, 2004, or
  • after March 22, 2004, and before 2005, and you made an election. See Election.

Also include in Class 10 motor vehicles, as well as some passenger vehicles.

Include passenger vehicles in Class 10 unless they meet a Class 10.1 condition.

Class 10.1 (30%)

Your passenger vehicle can belong in either Class 10 or Class 10.1.

To determine the class your passenger vehicle belongs in, you have to use the cost of the vehicle before you add the GST/HST or the PST.

Include your passenger vehicle in Class 10.1 if you bought it in your 2013 fiscal period and it cost more than $30,000. List each Class 10.1 vehicle separately.

We consider the capital cost of a Class 10.1 vehicle to be $30,000 plus the related GST/HST or PST. The $30,000 amount is the capital cost limit for a passenger vehicle.

Note

Use the GST rate of 5% and the appropriate PST rate for your province or territory. If your province is a participating province, use the HST. For more information on the GST and the HST, see Guide RC4022, General Information for GST/HST Registrants.

Example

Karim owns a sporting goods retail business. On July 21, 2013, he bought two passenger vehicles to use in his business. The PST rate for his province is 8%. Karim noted these details for 2013:

The capital cost of that vehicle
not applicableCostGSTPSTTotal
Vehicle 1 $33,000 $1,650 $2,640 $37,290
Vehicle 2 $28,000 $1,400 $2,240 $31,640

Karim puts Vehicle 1 in Class 10.1, since he bought it in 2013 and it cost him more than $30,000. Before Karim enters an amount in column 3 of Area B, he has to calculate the GST and PST that he would have paid on $30,000. He does this as follows:

  • GST at 5% of $30,000 = $1,500
  • PST at 8% of $30,000 = $2,400

Therefore, Karim's capital cost for Vehicle 1 is $33,900 ($30,000 + $1,500 + $2,400). He enters this amount in column 3 of Area B.

Karim puts Vehicle 2 in Class 10, since he bought it in 2013 and it did not cost him more than $30,000.

Karim's capital cost for Vehicle 2 is $31,640 ($28,000 + $1,400 + $2,240). He enters this amount in column 3 of Area B.

Class 12 (100%)

Class 12 includes china, cutlery, linen, uniforms, dies, jigs, moulds, cutting or shaping parts of a machine, tools, computer software (except systems software). Also included are video cassettes, video laser discs, and digital video disks that you rent and do not expect to rent to any person for more than seven days in a 30 day period.

The cost limit for access to the Class 12 (100%) treatment is $500 for:

  • tools acquired on or after May 2, 2006; and
  • medical or dental instruments and kitchen utensils acquired on or after May 2, 2006.

However, if the tools, medical or dental instruments and kitchen utensils cost $500 or more, include the cost in Class 8.

Tools eligible under this class specifically exclude electronic communication devices and electronic data processing equipment.

Class 29

You can elect to put in Class 29 eligible machinery and equipment used in Canada to manufacture and process goods for sale or lease, acquired after March 18, 2007, and before 2016, (under proposed changes) that would otherwise be included in Class 43. To make an election, attach a letter to your income tax return for the tax year you bought the property indicating you are electing to put the property in Class 29. Regular Class 43 treatment will apply to these eligible assets that are acquired after 2015 (under proposed changes).

Calculate the CCA for Class 29 using the straight line method as follows: claim up to 25% in the first year, 50% in the second year, and the remaining 25% in the third year. Any amount not claimed in a year can be claimed in a later year.

Class 43 (30%)

Include in Class 43 with a CCA rate of 30% eligible machinery and equipment, used in Canada to manufacture and process goods for sale or lease, which are not included in Class 29.

You can put this property in a separate class if you file an election by attaching a letter to your income tax return for the year in which you acquired the property. For information on separate class elections, see the note in Class 8 (20%).

Class 45 (45%)

Include general-purpose electronic data processing equipment (commonly called computer hardware) and systems software for that equipment, including ancillary data processing equipment, in Class 45 with a CCA rate of 45% if you acquired them after March 22, 2004, and before March 19, 2007.

Note

If you acquired the equipment or software before 2005 and made the separate Class 8 election, as discussed in the Class 8 note, the property does not qualify for the 45% rate.

Class 46 (30%)

Include in Class 46 with a CCA rate of 30% data network infrastructure equipment and systems software for that equipment if they were acquired after March 22, 2004. If they were acquired before March 23, 2004, include them in Class 8. See Class 8 (20%).

Class 50 (55%)

Include in Class 50 with a CCA rate of 55% property acquired after March 18, 2007, that is purpose electronic data processing equipment and systems software for that equipment, including ancillary data processing equipment, but not including property that is included in Class 29, Class 52 or that is mainly or is used mainly as:

  1. electronic process control or monitor equipment;
  2. electronic communications control equipment;
  3. systems software for equipment referred to in a) or b); or
  4. data handling equipment (other than data handling equipment that is ancillary to general purpose electronic data processing equipment).

Class 52 (100%)

Include in Class 52 with a CCA rate of 100% (with no half-year rule) general-purpose electronic data processing equipment (commonly called computer hardware) and systems software for that equipment, including ancillary data processing equipment if they were acquired after January 27, 2009, and before February 2011, but not including property that is mainly or is used mainly as:

  1. electronic process control or monitor equipment;
  2. electronic communications control equipment;
  3. systems software for equipment referred to in a) or b); or
  4. data handling equipment (other than data handling equipment that is ancillary to purpose electronic data handling equipment).

To qualify for this rate the asset must also:

  • be situated in Canada;
  • not have been used, or acquired for use, for any purpose before it is acquired by the taxpayer;
  • be acquired by the taxpayer:
    • for use in a business carried on by the taxpayer in Canada or to earn income from property situated in Canada; or
    • for lease by the taxpayer to a lessee for the lessee to use in a business the lessee carried on in Canada or to earn income from property situated in Canada.

Special situations

Personal use of property

If you buy property for business and personal use, you can show the business part of the property in Area B or Area C in one of two ways:

  • If your business use stays the same from year to year, enter in Area B or Area C the total cost of the property in column 3, the personal part in column 4, and the business part in column 5. To calculate the CCA you can claim, enter in column 3 of Area A the amount from column 5 of Area B or Area C.
  • If your business use changes from year to year, enter in Area B or Area C the total cost of the property in column 3 and column 5, and enter "0" in column 4. Enter in column 3 of Area A the amount from column 5 of Area B or Area C and calculate the CCA amount (business and personal) in column 9. The amount in column 10 (UCC at the end of the year) is equal to the amount in column 5 minus the amount in column 9. When you claim CCA on Form T2125, you have to calculate the allowable part of the column 9 amount based on your business use. See the example that summarizes this chapter.

You have to report the CCA calculated for the business use of a work space in your home in Area A of Form T2125 in the "Calculation of business-use-of-home expenses chart," of the form. Subtract the CCA from the total amount of the CCA for the year calculated in Area A but do not include it on line 9936, "Capital cost allowance (CCA), " in Part 5 of Form T2125.

Example

Nadir owns a financial consulting business. He bought a car in 2013 for personal and business use. The car cost $20,000, including all charges and taxes. Therefore, he includes the car in Class 10. His business use this year was 12,000 kilometres of the total 18,000 kilometres driven. He calculates his CCA on the car for 2013 as follows:

He enters $20,000 in column 3 and column 5 of Area B. Nadir also enters $20,000 in column 3 of Area A. By completing the other columns in the chart, he calculates CCA for the year of $3,000. Because Nadir used his car partly for personal use, he calculates his CCA claim as follows:

12,000 (business kilometres) ÷ 18,000 (total kilometres) × $3,000 = $2,000

Nadir enters $2,000 on line 9936, "Capital cost allowance (CCA)," of his Form T2125.

Note

The capital cost limits on a Class 10.1 vehicle (a passenger vehicle) still apply when you split the capital cost between business and personal use. For more information, see Class 10.1 (30%).

Changing from personal to business use

If you bought a property for personal use and started using it in your business in your 2013 fiscal period, there is a change in use. You need to determine the capital cost for business purposes.

If the FMV of a depreciable property is less than its original cost when you change its use, the amount you put in column 3 of Area B or Area C is the FMV of the property (excluding the land value if the property is land and a building). If the FMV is more than the original cost of the property (excluding the land value if the property is land and a building) when you change its use, use the following chart to determine the amount to enter in column 3 of Area B or Area C.

When you start using your property for business use, you are considered to have disposed of it. If the FMV of the property is more than its cost, you may have a capital gain. For more information on capital gains, see Guide T4037, Capital Gains.

Capital cost calculation
Actual cost of the property
$Blank space for dollar value 
Line 1
FMV of the property
$Blank space for dollar value 
Line 2
 
Amount from line 1
$Blank space for dollar value 
Line 3
 
Line 2 minus line 3
(if negative, enter "0")
$Blank space for dollar value 
Line 4
 
Enter any capital gains deduction claimed for the amount on line 4Footnote 1
$Blank space for dollar value 
× 2 =
$Blank space for dollar value 
Line 5
 
Line 4 minus line 5
(if negative, enter "0")
$Blank space for dollar value 
× 1/2 =
$Blank space for dollar value 
Line 6
Capital cost line 1 plus line 6
$Blank space for dollar value 
Line 7
Footnotes
Footnote 1

Enter the amount that relates to the depreciable property only.

Return to footnote 1 referrer

Note

We consider you to acquire the land for an amount equal to its FMV when you change its use. Include this amount on line 9923, "Total cost of all land additions in the year", in Area F.

Grants, subsidies, and rebates

You may get a grant or subsidy from a government or a government agency to buy depreciable property. When this happens, subtract the amount of the grant, subsidy or rebate from the property's capital cost. Do this before you enter the capital cost in column 3 of Area B or Area C.

You may have paid GST/HST on some of the depreciable property you acquired for your business. If so, you may have also received an input tax credit from us. The input tax credit is government assistance. Therefore, subtract it from the property's capital cost. Do this before you enter the capital cost in column 3 of Area B or Area C, whichever applies. If you get an input tax credit for a passenger vehicle you use in your business, use one of these methods:

  • For a passenger vehicle you used 90% or more for your business, subtract the amount of the credit from the vehicle's cost before you enter its capital cost in column 3 of Area B.
  • For a passenger vehicle you used less than 90% for your business, do not make an adjustment in  2013. Instead, subtract the amount of the credit from your beginning undepreciated capital cost (UCC) in 2014.

You may get an incentive from a non-government agency to buy depreciable property. If this happens, you can either include the amount in income or subtract the amount from the capital cost of the property. If the rebate is more than the remaining UCC in the particular class, add the excess to income on line 8230, "Other income."

For more information about government assistance, see   Interpretation Bulletin IT‑273, Government Assistance - General Comments.

Non-arm's length transactions

When you acquire property in a non-arm's length transaction, there are special rules for determining the property's capital cost. These special rules do not apply if you get the property because of someone's death.

You can acquire depreciable property in a non-arm's length transaction from an individual resident in Canada, a partnership with at least one partner who is an individual resident in Canada, or a partnership with at least one partner that is another partnership. If you pay more for the property than the seller paid for the same property, calculate the cost as follows:

Capital cost calculation
Non-arm's length transaction - Resident of Canada
The seller's cost or capital cost
$Blank space for dollar value 
Line 1
The seller's proceeds of disposition
$Blank space for dollar value 
Line 2
 
Amount from line 1
$Blank space for dollar value 
Line 3
 
Line 2 minus line 3
(if negative, enter "0")
$Blank space for dollar value 
Line 4
 
Enter any capital gains deduction claimed for the amount on line 4 
$Blank space for dollar value 
× 2 =
$Blank space for dollar value 
Line 5
 
Line 4 minus line 5
(if negative, enter "0")
$Blank space for dollar value 
× 1/2 =
$Blank space for dollar value 
Line 6
Capital cost: line 1 plus line 6
$Blank space for dollar value 
Line 7
Enter this amount in column 3 of either Area B or C, whichever applies. Do not include the cost of the related land. Include the cost of the related land, on line 9923, "Total cost of all land additions in the year", in Area F.

You can also buy depreciable property in a non-arm's length transaction from a corporation or from an individual who is not resident in Canada, or from a partnership with no partners who are individuals resident in Canada or with no partners that are other partnerships. If you pay more for a property than the seller paid for it, calculate the capital cost as follows:

Capital cost calculation
Non-arm's length transaction - Non-resident of Canada
The seller's cost or capital cost
$Blank space for dollar value 
Line 1
The seller's proceeds of disposition
$Blank space for dollar value 
Line 2
 
Amount from line 1
$Blank space for dollar value 
Line 3
 
Line 2 minus line 3
(if negative, enter "0")
$Blank space for dollar value 
× 1/2 =
$Blank space for dollar value 
Line 4
Capital cost line 1 plus line 4
$Blank space for dollar value 
Line 5
Enter this amount in column 3 of either Area B or C, whichever applies. Do not include the cost of the related land. Include the cost of the related land, on line  9923, "Total cost of all land additions in the year", in Area F.

If you buy depreciable property in a non-arm's length transaction and pay less for it than the seller paid, your capital cost is the same amount as the seller paid. We consider you to have deducted as CCA the difference between what you paid and what the seller paid.

Example

Rachel bought a pickup truck for $4,000 from her father, Marcus, in her 2013 fiscal period. Marcus paid $10,000 for the truck in 2008. Since the amount Rachel paid is less than the amount Marcus paid, we consider Rachel's cost to be $10,000. We also consider Rachel to have deducted CCA of $6,000 in the past ($10,000 − $4,000).

Rachel completes the CCA chart as follows:

  • In Area B, she enters $10,000 in column 3, "Total cost."
  • In Area A, she enters $4,000 in column 3, "Cost of additions in the year," as the addition for her 2013 fiscal period.

There is a limit on the capital cost of a passenger vehicle you buy in a non-arm's length transaction. The cost is the least of the following three amounts:

  • the FMV when you buy it;
  • $30,000 plus the GST/HST or PST you would pay on $30,000, if you bought it in your 2013 fiscal period; or
  • the seller's cost amount of the vehicle when you buy it.

The cost amount can vary, depending on what the seller used the vehicle for before you bought it. If the seller used the vehicle to earn income, the cost amount will be the UCC of the vehicle when you buy it. If the seller did not use the vehicle to earn income, the cost amount will usually be the original cost of the vehicle.

For more information on non-arm's length transactions, see Interpretation Bulletin IT‑419, Meaning of Arm's Length.

Capital gains

If you sell a property for more than it cost, you may have a capital gain. List the dispositions of all your properties on Schedule 3, Capital Gains (or Losses) in 2013. You will find a copy of this schedule in your general income tax and benefit package. For information on how to calculate your taxable capital gain, see Guide T4037, Capital Gains.

You may be a partner in a partnership that gives you a T5013 slip, Statement of Partnership Income. If the partnership has a capital gain, it will allocate part of that gain to you. The gain will show on the partnership's financial statements or on your T5013.

Note

You cannot have a capital loss when you sell depreciable property. However, you can have a terminal loss. For an explanation of terminal losses, see Column 5 - UCC after additions and dispositions.

Special rules for disposing of a building in the year

If you disposed of a building in the year, special rules may apply that make the proceeds of disposition an amount other than the actual proceeds of disposition. This happens when you meet both of the following conditions:

  • you disposed of the building for an amount less than both its cost amount, as calculated below, and its capital cost to you; and
  • you, or a person with whom you do not deal at arm's length, owned the land that the building is on, or the land next to it, which was necessary for the building's use.

To calculate the cost amount:

  • If the building was the only property in the class, the cost amount is the UCC of the class before you disposed of the building.
  • If more than one property is in the same class, you have to calculate the cost amount of each building as follows:

capital cost of the building ÷ capital cost of all property in the class not previously disposed of × UCC of the class = cost amount of the building

Note

If any property in the class of the building that was acquired at non-arm's length was previously used for a purpose other than gaining or producing income, or if the part of a property used to gain or produce income has changed, the capital cost of the property has to be recalculated to determine the cost amount of the property.

For more information about proceeds of disposition, see  Interpretation Bulletin IT‑220, Capital Cost Allowance – Proceeds of Disposition of Depreciable Property, and its Special Release, and   Interpretation Bulletin IT‑285, Capital Cost Allowance – General Comments.

If you disposed of a building under these conditions, and you or a person with whom you do not deal at arm's length disposed of the land in the same year, calculate your deemed proceeds of disposition as shown in Calculation A.

If you, or a person with whom you do not deal at arm's length, did not dispose of the land in the same year as the building, calculate your deemed proceeds of disposition as shown in Calculation B.

Calculation A - Land and building disposed of in the same year
Fair market value of the building when you disposed of it
$Blank space for dollar value 
Line 1
Fair market value of the land just before you disposed of it
$Blank space for dollar value 
Line 2
Line 1 plus line 2
$Blank space for dollar value 
Line 3
Seller's adjusted cost base of the land
$Blank space for dollar value 
Line 4
Total capital gains (without reserves) from any disposition of the land (such as a change in use) in the three-year period before you disposed of the building (by you, or by a person not dealing at arm's length with you, to you or to another person not dealing at arm's length with you)
$Blank space for dollar value 
Line 5
Line 4 minus line 5 (if negative, enter "0")
$Blank space for dollar value 
Line 6
Line 2 or line 6, whichever amount is less
$Blank space for dollar value 
Line 7
Line 3 minus line 7 (if negative, enter "0")
$Blank space for dollar value 
Line 8
Cost amount of the building just before you disposed of it
$Blank space for dollar value 
Line 9
Capital cost of the building just before you disposed of it
$Blank space for dollar value 
Line 10
Line 9 or line 10, whichever amount is less
$Blank space for dollar value 
Line 11
Line 1 or line 11, whichever amount is more
$Blank space for dollar value 
Line 12
Deemed proceeds of disposition for the building
Line 8 or line 12, whichever amount is less (enter this amount in column 3 of Area E and in column 4 of Area A on Form T2125)
$Blank space for dollar value 
Line 13
Deemed proceeds of disposition for the land
Proceeds of disposition of the land and building
$Blank space for dollar value 
Line 14
Amount from line 13
$Blank space for dollar value 
Line 15
Line 14 minus line 15 (enter this amount on line 9924 of Area F on Form T2125)
$Blank space for dollar value 
Line 16
If you have a terminal loss on the building, include it on line 9270, "Other expenses", in Part 5 of Form T2125.
Calculation B - Land and building disposed of in different years
Cost amount of the building just before you disposed of it
$Blank space for dollar value 
Line 1
Fair market value of the building just before you disposed of it
$Blank space for dollar value 
Line 2
Line 1 or line 2, whichever amount is more
$Blank space for dollar value 
Line 3
Actual proceeds of disposition, if any
$Blank space for dollar value 
Line 4
Line 3 minus line 4
$Blank space for dollar value 
Line 5
Line 5 $
Blank space for dollar value 
× 1/2 =
$Blank space for dollar value 
Line 6
Amount from line 4
$Blank space for dollar value 
Line 7
Deemed proceeds of disposition for the building
Line 6 plus line 7. Enter this amount in column 3 of Area E and in column 4 of Area A.
$Blank space for dollar value 
Line 8
If you have a terminal loss on the building, include it on line 9270, "Other expenses", in Part 5 of Form T2125.

Ordinarily, you can deduct 100% of a terminal loss but only 50% of a capital loss. Calculation B makes sure that you use the same percentage to calculate a terminal loss on a building as you use to calculate a capital loss on land. As a result of this calculation, add 50% of the amount on line 5 to the actual proceeds of disposition from the building. If you have a terminal loss, see Terminal loss.

Replacement property

In a few cases, you can postpone or defer adding a capital gain or recapture of CCA to income. You might sell a business property and replace it with a similar one, or your property might be stolen, destroyed, or expropriated and you replace it with a similar one. You can defer tax on the sale proceeds, which you reinvest in replacement property within a reasonable period of time. To defer reporting the capital gain or recapture of CCA, you (or a person related to you) must use the new property for the same or similar purpose as the one that you are replacing.

For more information, see   Interpretation Bulletin IT‑259, Exchange of Property, and   Interpretation Bulletin IT‑491, Former Business Property, and its Special Release. You can also defer a capital gain or recapture of CCA when you transfer property to a corporation or a partnership. For more information, see  version of:

The following example summarizes this chapter:

Example

When Cathy bought her new car in May 2013, it cost $16,000 including all charges and taxes. Since the cost of the car was $30,000 or less, she includes the car in Class 10. She was allowed a $1,000 credit when she traded in her old car (which was also in Class 10). Her UCC on the old car at the start of 2013 was $1,000. Cathy knows that her personal use of the car will vary each year.

Cathy has a desk, calculator, filing cabinets, and shelves in her store. These are Class 8 depreciable properties. The UCC of these properties at the start of 2013 is $5,000. She did not buy any Class 8 properties in 2013. Therefore; she completes Form T2125 as follows:

Area A - Calculation of capital cost allowance claim
1
Class number
2
Undepreciated capital cost (UCC) at the start of the year
3
Cost of additions in the year (see Area B and C below)
4
Proceeds of dispositions in the year (see Area D and E below)
5Footnote 1
UCC after additions and dispositions (col. 2 plus col. 3 minus col. 4)
6
Adjustment for current year additions 1/2 × (col. 3 minus col. 4) If negative, enter "0"
7
Base amount for CCA (col. 5 minus col. 6)
8
Rate %
9
CCA for the year (col. 7 × col. 8 or an adjusted amount)
10
UCC at the end of the year (col. 5 minus col. 9)
Footnotes
Footnote 1

If you have a negative amount in this column, add it to income as a recapture on line 8230, "Other income", in Part 3. If no property is left in the class and there is a positive amount in the column, deduct the amount from income as a terminal loss on line 9270 "Other expenses", in Part 5. Recapture and terminal loss do not apply to Class 10.1 property. For more information, see Chapter 4.

Return to footnote 1 referrer

Footnote 2

For information on the CAA for "Calculation of business-use-of-home expenses" see Chapter 4 - Special Situations.

Return to footnote 2 referrer

10 1,000 16,000 1,000 16,000 7,500 8,500 30 2,550 13,450
8 5,000 0 0 5,000 0 5,000 20 1,000 4,000
Total CCA claim for the year (enter this amount, minus any personal part and any CCA for business-use-of-home expenses, on line 9936 in Part 5Footnote 2) 3,550  0
Area B - Details of equipment additions in the year
1
Class number
2
Property details
3
Total cost
4
Personal part (if applicable)
5
Business part (column 3 minus column 4)
10 Passenger vehicle 16,000 varies 16,000
Total equipment additions in the year Line 9925 16,000
Area D - Details of equipment dispositions in the year
1
Class number
2
Property details
3
Total cost
4
Personal part (if applicable)
5
Business part (column 3 minus column 4)
10 Passenger vehicle 1,000 N/A 1,000
Total equipment dispositions in the year Line 9926 1,000
Note

If you disposed of property from your business in the year, see Chapter 4 for information about your proceeds of disposition.

Since Cathy used the car partly for personal use, she calculates the amount to include on line 9936 for her car as follows:

25,000 (business kilometres) ÷ 30,000 (total kilometres) × $2,550 = $2,125

She wants to claim the maximum CCA allowed to her in 2013. The most that Cathy can claim for CCA for 2013 is $2,125 for her car and $1,000 for the Class 8 properties. She enters $3,125 on line 9936 in Part 5 of Form T2125.

Summary of Chapters 2 to 4 - Completed Form T2125

In this section, we summarize our discussion about income, expenses, and capital cost allowance, by showing you what the completed Form T2125 would look like for Cathy's business and recapping the information we have so far.

Completed Form T2125 for Cathy's business
Income, expenses, and capital cost allowanceAmount
Total sales (does not include GST/HST or PST) $189,000
Returned items $1,000
Inventory at the start of her 2013 fiscal period $36,500
Inventory at the end of her 2013 fiscal period $30,000
Purchases (including freight and other expenses) $88,000
Meals and entertainment expenses (allowable amount) $50
Motor vehicle expenses $3,125
Convention expenses $500
Capital cost allowance $3,125
Cathy also entered these expenses in her expense journals: Amount
Accounting fees $750
Advertising $2,800
Business tax $550
Business insurance $1,600
Interest on business loan $5,300
Maintenance $800
Office supplies $2,700
Rent of store $10,800
Salaries (full and part-time employees) $19,000
Travelling (except car) $350
Utilities on store $3,500

Therefore, the calculation of Cathy's net business income on her Form T2125 would look like this:

Part 1 - Business income
If you have business income, tick this box and complete this part. Do not complete parts 1 and 2 on the same form.
Gross sales, commissions, or fees (including GST/HST collected or collectible)
$189,000.00
Line
A
Minus
PST, GST/HST, returns, allowances, discounts included in sales, and GST/HST adjustments
$1,000.00
Line
(i)
Subtotal (line A minus line (i))
$188,000.00
Line
B
For those using the Quick Method - Government assistance calculated as follows: GST/HST collected or collectible on professional fees eligible for the Quick Method
$ Blank space for dollar value0
Line
(ii)
GST/HST remitted, calculated on (sales, commissions, and fees eligible for the Quick Method plus GST/HST collected or collectible) multiplied by the applicable Quick method remittance rate
$ Blank space for dollar value0
Line
(iii)
Subtotal (line (ii) minus line (iii)
$ Blank space for dollar value0
Line
(iv)
Adjusted gross sales (line B plus line (iv)
(enter this amount on line 8000 in Part 3, below)
$188,000.00
Line
C
Part 3 - Gross business or professional income
Adjusted gross sales (from line C in Part 1) or adjusted professional fees (from line F in Part 2)
8000
$188,000.00
Line
G
Plus - Reserves deducted last year
8290
$ Blank space for dollar value0
Other income
8230
$ Blank space for dollar value0
Total of above two lines
$ Blank space for dollar value0
Line
H
Gross business or professional income (line G plus line H)
8299
$188,000.00
Enter this amount on the appropriate line of your income tax and benefit return: business on line 162, professional on line 164, or commission on line 166.

If GST/HST has been remitted or an input tax credit has been claimed, do not include GST/HST in the calculation of cost of goods sold, expenses or net income (loss) in parts 4 to 6.

Part 4 - Cost of goods sold and gross profit

If you have business income, complete this part. Enter only the business part of the costs.

Gross business income from line 8299 in Part 3
$188,000.00
Line
I
Opening inventory (include raw materials, goods in process, and finished goods)
8300
$36,500.00
Purchases during the year (net of returns, allowances, and discounts)
8320
$88,000.00
Direct wage costs
8340
$ Blank space for dollar value0
Subcontracts
8360
$ Blank space for dollar value0
Other costs
8450
$ Blank space for dollar value0
Total of the above five lines
$124,500.00
Minus - Closing inventory (include raw materials, goods in process, and finished goods)
8500
$30,000.00
Cost of goods sold
8518
$94,500.00
Line
J
Gross Profit (line I minus line J)
8519
$93,500.00
Part 5 - Net income (loss) before adjustments
Gross profit from line 8519 in Part 4 above, or gross income from line 8299 in Part 3
$93,500.00
Line
K
Expenses (enter only the business part)
Advertising
8521
$2,800.00
Meals and entertainment (allowable part only)
8523
$50.00
Bad debts
8590
$ Blank space for dollar value0
Insurance
8690
$1,600.00
Interest
8710
$5,300.00
Business tax, fees, licences, dues, memberships, and subscriptions
8760
$550.00
Office expenses
8810
$2,700.00
Supplies
8811
$ Blank space for dollar value0
Legal, accounting, and other professional fees
8860
$750.00
Management and administration fees
8871
$ Blank space for dollar value0
Rent
8910
$10,800.00
Maintenance and repairs
8960
$800.00
Salaries, wages, and benefits (including employer's contributions)
9060
$19,000.00
Property taxes
9180
$ Blank space for dollar value0
Travel (including transportation fees, accommodations, and allowable part of meals)
9200
$350.00
Telephone and utilities
9220
$3,500.00
Fuel costs (except for motor vehicles)
9224
$ Blank space for dollar value0
Delivery, freight, and express
9275
$ Blank space for dollar value0
Motor vehicle expenses (not including CCA) (see Chart A)
9281
$3,125.00
Allowance on eligible capital property
9935
$ Blank space for dollar value0
Capital cost allowance (CCA) (from Area A)
9936
$3,125.00
Other expenses (specify)
9270
$500.00
Total business expenses
9368
$54,950.00
Line L
Net income (loss) before adjustments (line K minus line L)
9369
$38,550.00
Part 6 - Your net income (loss)
Your share of the amount on line 9369 in Part 5 or the amount from slip T5013
$38,550.00
Line
M
Plus: GST/HST rebate for partners received in the year (see Chapter 3)
9974
$ Blank space for dollar value0
Line
N
Total (line M plus line N)
$38,550.00
Line O
Minus: Other amounts deductible from your share of net partnership income (loss) (from the chart)
9943
$ Blank space for dollar value0
Line P
Net income (loss) after adjustments (line O Minus line P)
$38,550.00
Line Q
Minus: Business-use-of-home expenses (your share of line 3 from the chart)
9945
$ Blank space for dollar value0
Line R
Your net income (loss) (line Q minus line R)
9946
$38,550.00
Enter this amount on the appropriate line of your income tax and benefit return: business on line 135, professional on line 137, or commission on line 139.
CCA classes of commonly used business assets
ClassRate %Description
1 4 Most buildings you bought after 1987 and the cost of certain additions or alterations made after 1987. The rate for eligible non-residential buildings acquired after March 18, 2007, and used in Canada to manufacture and process goods for sale or lease includes an additional allowance of 6% (total 10%). For all other eligible non-residential buildings in this class, the rate includes an additional allowance of 2% (total 6%). To be eligible for the additional allowances, elections have to be filed. For more information, see Class 1 (4%).
3 5 Most buildings acquired before 1988 (or 1990, subject to certain conditions). Also include the cost of additions or alterations made after 1987. For more information, see Class 3 (5%).
6 10 Frame, log, stucco on frame, galvanized iron, or corrugated metal buildings that meet certain conditions. Class 6 also includes certain fences and greenhouses. For more information, see Class 6 (10%).
8 20 Property that you use in your business that is not included in another class. Also included is data network infrastructure equipment and systems software for that equipment acquired before March 23, 2004. Also see Class 46. For more information, see Class 8 (20%).
10 30 General-purpose electronic data processing equipment (commonly called computer hardware) and systems software for that equipment acquired before March 23, 2004, or after March 22, 2004, and before 2005 if you made an election. Motor vehicles and some passenger vehicles. Also see Class 10.1. For more information, see Class 10 (30%).
10.1 30 A passenger vehicle not included in Class 10. For more information, see Class 10.1 (30%).
12 100 The cost limit for access to Class 12 (100 %) treatment is $500 for tools acquired on or after May 2, 2006, and medical and dental instruments and kitchen utensils acquired on or after May 2, 2006. For more information, see Class 12 (100%).
13 No rate varies Leasehold interest – You can claim CCA on a leasehold interest, but the maximum rate depends on the type of leasehold interest and the terms of the lease.
14 No ratevaries Patents, franchises, concessions, or licences for a limited period. Your CCA is whichever of the following amounts is less:
  • the total of the capital cost of each property spread out over the life of the property; or
  • the undepreciated capital cost to the taxpayer as of the end of the tax year of property of that class.
16 40 Taxis, vehicles you use in a daily car rental business, coin operated video games or pinball machines acquired after February 15, 1984, and freight trucks acquired after December 6, 1991, that are rated above 11,788 kg.
17 8 Roads, parking lots, sidewalks, airplane runways, storage areas, or similar surface construction.
29 varies Eligible machinery and equipment used in Canada to manufacture and process goods for sale or lease, acquired after March 18, 2007, and before 2016 (under proposed changes) that would otherwise be included in Class 43. To make an election, attach a letter to your income tax return for the tax year you bought the property, indicating you are electing to put the property in Class 29. Regular Class 43 treatment will apply to these eligible assets that are acquired after 2015 (under proposed changes). General purpose electronic data processing equipment (commonly called computer hardware) and systems software for that equipment, including associated data processing equipment, if acquired after March 18, 2007, and before January 28, 2009, and used in qualifying manufacturing and processing activities that otherwise would be in Class 50. For more information, see Class 29.
43 30 Eligible machinery and equipment used in Canada to manufacture and process goods for sale or lease that are not included in Class 29. For more information, see Class 43 (30%),
45 45 General-purpose electronic data-processing equipment (commonly called computer hardware) and systems software for that equipment acquired after March 22, 2004, and before March 19, 2007. For more information, see Class 45 (45%). Also see classes 10, 50, and 52.
46 30 Data network infrastructure equipment and systems software for that equipment acquired after March 22, 2004, (if acquired before March 23, 2004 include them in Class 8).
50 55 General-purpose electronic data-processing equipment (commonly called computer hardware) and systems software for that equipment, including ancillary data-processing equipment acquired after March 18, 2007, and not included in Class 29 or Class 52. For more information, see Class 50 (55%).
52 100 General-purpose electronic data-processing equipment (commonly called computer hardware) and systems software for that equipment, including ancillary data-processing equipment acquired after January 27, 2009, and before February 2011. For more information, see Class 52 (100%). Also see Class 50.

Chapter 5 - Eligible capital expenditures

What is an eligible capital expenditure?

You may buy property that does not physically exist but gives you a lasting economic benefit. Some examples are goodwill, franchises, concessions, and licences for an unlimited period. We call this kind of property eligible capital property. The price you pay to buy this type of property is an eligible capital expenditure.

Franchises, concessions, and licences with a limited period are considered depreciable properties, not eligible capital properties. For more information about depreciable properties, see Chapter 4.

What is an annual allowance?

You cannot fully deduct an eligible capital expenditure because the expenditure is considered to be capital in nature and provides a lasting economic benefit. However, you can deduct part of its cost each year. We call the amount you can deduct your annual allowance.

What is a cumulative eligible capital account?

This is the bookkeeping record you establish to determine your annual allowance. You also use your cumulative eligible capital (CEC) account to keep track of the property you buy and sell. We call the property in your CEC account your eligible capital property. You base your annual allowance on the balance in your account at the end of your fiscal period. Keep a separate account for each business, but include all eligible capital property for the one business in the same CEC account.

How to calculate your annual allowance

CEC account

Complete the following chart to calculate your annual allowance and the balance in your CEC account at the end of your 2013 fiscal period.

Calculating your annual allowance and CEC account balance at the end of your 2013 fiscal period
Balance in the account at the start of your 2013 fiscal period
$Blank space for dollar value 
Line 1
Eligible capital expenditures you made or incurred in your 2013 fiscal period 
Blank space for dollar value 
× 75%
$Blank space for dollar value 
Line 2
Line 1 plus line 2
$Blank space for dollar value 
Line 3
All the amounts you received or are entitled to receive from the sale of eligible capital property in your 2013 fiscal period
$Blank space for dollar value 
Line 4
 
All the amounts that became receivable in your 2013 fiscal period from the sale of eligible capital properties before June 18, 1987
$Blank space for dollar value 
Line 5
 
Line 4 plus line 5
$Blank space for dollar value 
Line 6
 
Line 6 × 75%
$Blank space for dollar value 
Line 7
CEC account balance Line 3 minus line 7
$Blank space for dollar value 
Line 8
Annual allowance 7% × line 8
$Blank space for dollar value 
Line 9
CEC account balance at the end of your 2013 fiscal period Line 8 minus line 9
$Blank space for dollar value 
Line 10
Note

An eligible capital expenditure is reduced by the amount of any assistance received or receivable from a government for the expenditure. Also, an amount forgiven (or entitled to be forgiven) on government debt reduces your CEC account. Special conditions may apply to non-arm's length transactions.

You can deduct an annual allowance if there is a positive balance (line 8) in your CEC account at the end of your 2013 fiscal period. You do not have to claim the full amount of the maximum annual allowance for a given year. You can deduct any amount you want, up to the maximum allowable of 7%. If your fiscal period is less than 365 days, you have to prorate your claim. Base your claim on the number of days in your fiscal period compared to 365 days.

If there is a negative balance in your CEC account, see Sole proprietor - Sale of eligible capital property in the 2013 fiscal period and Partnership - Sale of eligible capital property in the 2013 fiscal period. The following is an example of how to calculate the maximum annual allowance and account balance.

Example

Carlo started a business on January 1, 2013. Carlo's business has a December 31 year-end. During 2013, he bought a franchise for $16,000. He calculates his maximum annual allowance of $840 for 2013 as follows:

Carlo's CEC account
Balance at the start of Carlo's 2013 fiscal period
$0 
Line 1
Carlo's eligible capital expenditure: franchise cost for the 2013 fiscal period
$16,000 × 75%
$12,000 
Line 2
Line 1 plus line 2
$12,000 
Line 3
Carlo has not sold any eligible capital property during his 2013 fiscal period. Therefore, he will not have any amounts on lines 4 to 8.
Carlo's maximum annual allowance on eligible capital property is 7% × line 3
$840 
Line 9
Balance at the end of 2013 (line 3 minus line 9)
$11,160 
Line 10

Sole proprietor - Sale of eligible capital property in the 2013 fiscal period

When you sell eligible capital property, you have to subtract part of the proceeds of disposition from your CEC account.

You have to do this calculation if you sold eligible capital property:

  • in your 2013 fiscal period; or
  • before June 18, 1987, and the proceeds of disposition become due to you in your 2013 fiscal period.

For 2013, the amount you have to subtract is 75% of the total of these amounts:

  • the proceeds of disposition of all the eligible capital property you sell in your 2013 fiscal period; and
  • the amount of any proceeds that become due to you in your 2013 fiscal period from eligible capital property you sold before June 18, 1987.

There may be a negative amount (excess) in your CEC account after you subtract the calculated amount. In this case, you will have to include part of the negative amount in your business income.

Multiply by 2/3 the part of the negative amount in your CEC account that exceeds the annual allowances deducted. To that result, add whichever is less, the excess or annual allowances deducted. This is the amount to include in your business income. The following example shows how to calculate the amount to include in your business income.

Example

Lisa started her business on January 1, 2007, with a December 31 year-end. In 2007, Lisa bought a client list for $10,000. Lisa sold her business on September 1, 2013. She sold her client list for $15,000 and she does not have any other eligible capital property in her business. She deducted annual allowances each year as follows:

2007
$525 
2008
$488 
2009
$454 
2010
$422 
2011
$393 
2012
$365 
Total
$2,647 

The amount that Lisa has to include in her business income is calculated as follows:

Calculation of amount A

Excess amount calculated as follows:

Proceeds of disposition × 75%
$15,000 × 75%
$11,250 
Plus: Total annual allowances deducted
$2,647 
Line (i)
$13,897 
Minus: Eligible capital expenditures × 75%
$10,000 × 75%
$7,500 
Excess amount
$6,397 
Line (ii)
The lesser of (i) or (ii)
$2,647 
Line A
Calculation of amount B
Excess amount
$6,397 
Minus: Total annual deductions taken
$2,647 
$3,750 
Line B
Calculation of amount C
Line B × 2/3
$2,500 
Line C
Taxable amount from the sale of client list:
Line A plus line C
$5,147 

Lisa includes $5,147 on line 8230, "Other income," in Part 3 of Form T2125.

Partnership - Sale of eligible capital property in the 2013 fiscal period

When the partnership sells eligible capital property, it has to subtract part of the proceeds of disposition from its CEC account.

The partnership has to do this calculation if it sold eligible capital property:

  • in its 2013 fiscal period; or
  • before June 18, 1987, and the proceeds of disposition become due in its 2013 fiscal period.

For 2013, the amount the partnership has to subtract is 75% of the total of these amounts:

  • the proceeds of disposition of all the eligible capital property the partnership sells in its 2013 fiscal period. The total proceeds of disposition have to be included even if the partnership will not receive the entire amount in 2013; and
  • the amount of any proceeds that become due in the partnership's 2013 fiscal period from eligible capital property it sold before June 18, 1987.

The partnership's CEC account may have a negative amount (excess) after it subtracts the required amount. If so, the partnership will have to include part of the negative amount in its business income

Multiply by 2/3 the part of the negative amount in the partnership's CEC account that exceeds the annual allowances deducted. To that result, add the lesser of the excess and annual allowances deducted. This is the amount to include in the partnership's business income. The next example shows how to calculate the amount to include in your business income.

The partnership has to include the business income that results from the sale of the eligible capital property on line 8230, "Other income," in Part 3 of Form T2125.

If you, as a partner in the partnership, had made the capital gains election by filing Form T664, Election to Report a Capital Gain on Property Owned at the end of February 22, 1994, with your 1994 income tax return for your partnership interest, you would have reported the capital gain accrued to February 22, 1994. In this case, the adjusted cost base of your partnership interest has not changed as a result of the election. Instead, you have created a special account called your exempt capital gains balance (ECGB). Your ECGB expired after 2004. If you did not use all of your ECGB by the end of 2004, you can add the unused balance to the adjusted cost base of your shares of, or interest in, the flow-through entity.

Example

You and your partner have operated a telephone sales business since January 1, 1994. Your partnership agreement states that you and your partner will share the business profits equally. The business has a December 31 year-end. You and your partner paid $10,000 for a client list when you started the business.

The business has no other eligible capital property. You and your partner sell the business on September 1, 2013. The proceeds of disposition of the client list are $15,000. As a partner of the partnership, you made the capital gains election in 1994 on your partnership interest and your current exempt capital gains balance (ECGB) is nil. In previous years, the partnership claimed $2,647 as annual allowances on eligible capital property.

Calculation of amount to include in business income - Sale of client list on September 1, 2013

The amount to include in the partnership's business income is calculated as follows:

Calculation of amount A

The lesser of (i) and (ii):

Actual proceeds of disposition × 75%
$15,000 × 75%
$11,250 
Plus: Total annual allowances deducted
$2,647 
Line (i)
$13,897 
Minus: (Eligible capital expenditures + 
ECGBFootnote 1) × 75% $10,000 × 75%
$7,500 
Excess amount
$6,397 
Line (ii)
The lesser of (i) or (ii)
$2,647 
Line A
Calculation of amount B
Excess amount
$6,397 
Minus: Total annual allowances deducted
$2,647 
$3,750 
Line B
Calculation of amount C
Line B × 2/3
$2,500 
Line C
Taxable amount from sale of client list:
Line A plus line C
$5,147 

According to this example, you should include $5,147 on line 8230, "Other income", on Form T2125.

Footnotes
Footnote 1

The amount of ECGB used in this calculation refers to any balance still in this account after December 31, 2004.

Return to footnote 1 referrer

Election

Under certain conditions, you can elect to treat the disposition of an eligible capital property (other than goodwill) as a regular capital gain. For example, properties such as a franchise, concession, or licence that has an unlimited life may qualify for this election. By electing, you deem to remove the property from your CEC account for proceeds equal to its original cost.

You can then declare a capital gain equal to your actual proceeds of disposition minus the cost of acquisition. Report the details on the "Real estate, depreciable property and other properties" line of Schedule 3, Capital Gains (or Losses) in 2013. This election will benefit you if you have unused capital losses to apply against the capital gain.

The election is available if you meet the following conditions:

  • you disposed of an eligible capital property other than goodwill;
  • the cost of the eligible capital property can be determined;
  • the proceeds of disposition exceed the cost; and
  • you do not have an exempt gains balance.

File your election by attaching a note to your income tax return.

Replacement property

If you sell an eligible capital property and replace it with another one for the same or similar use, you can choose to postpone all or part of any gain on the sale. This happens if you acquire a replacement eligible capital property within a certain period of time. To do this, you have to replace the property no later than one year after the end of the tax year in which you sell the original property.

For more information, see   Interpretation Bulletin IT‑143, Meaning of Eligible Capital Expenditure.

Appendix - Industry codes

These codes are for paper filers only

Professions

Industry Codes - Professions
ProfessionsIndustry codes
Offices of lawyers 541110
Offices of notaries 541120
Other legal services 541190
Offices of accountants 541212
Tax preparation services 541213
Bookkeeping, payroll and related services 541215
Financial and investment advice - Online 523990
architectural services 541310
Landscape architectural services 541320
Engineering services 541330
Drafting services 541340
Building inspection services 541350
Geophysical surveying and mapping services 541360
Surveying and mapping (except geophysical) services 541370
Testing laboratories 541380
Specialized design services 541400
Scientific research and development services 541700
Other advice and counselling - online 541990
Other professional, scientific and technical services 541900
Veterinary services (including animal hospitals) 541940
Offices of physicians 621110
Offices of mental health practitioners - (except physicians) 621330
Offices of dentists 621210
Offices of other health practitioners (incl. chiropractors, optometrists, speech therapists, psychologists) 621300
Out-patient care centres 621400
Medical and diagnostic laboratories 621500
Home health care services 621600
Other ambulatory health care services 621900

Services

Industry Codes - Agricultural or animal services
Agricultural or animal servicesIndustry codes
Support activities for crop production 115110
Support activities for animal production 115210
Industry Codes - Transportation or storage
Transportation or storageIndustry codes
Postal service 491110
Couriers 492110
Local messengers and local delivery 492200
Warehousing and storage 493100
Air transportation 481000
Rail transportation 482100
Deep sea, coastal and Great Lakes water transportation 483100
Inland water transport 483200
General freight trucking 484100
Specialized freight trucking 484200
Urban transit systems 485110
Interurban and rural bus transportation 485210
Taxi service 485310
Limousine service 485320
School and employee bus transportation 485410
Charter bus industry 485510
Other transit and ground passenger transportation 485990
Scenic and sightseeing transportation, land 487110
Scenic and sightseeing transportation, water 487210
Scenic and sightseeing transportation, Other 487990
Support activities for air transportation 488100
Support activities for rail transportation 488210
Support activities for water transportation 488300
Support activities for road transportation 488400
Freight transportation arrangement 488500
Other support activities for transportation 488990
Industry Codes - Communications or utilities
Communications or utilitiesIndustry codes
Newspaper, periodical, book and directory publishers 511100
Software publishers (except video game) 511211
Video game publishers 511212
Radio and television broadcasting 515100
Pay and specialty television 515210
Wired telecommunications carriers (incl. internet service providers) 517100
Wireless telecommunications carriers (except satellite) 517210
Satellite telecommunications 517410
Other telecommunications 517910
Other information services 519100
Advertising material distribution services 541870
Industry Codes - Finance, insurance, or real estate
Finance, insurance, or real estateIndustry codes
Credit intermediation and related activities 522000
Securities, commodity contracts, and other financial investment and related activities 523000
Insurance agencies and brokerages 524210
Claims adjusters 524291
All other insurance related activities 524299
Lessors of social housing projects 531112
Lessors of non-residential buildings (except mini-warehouses) 531120
Self-storage mini-warehouses 531130
Lessors of other real estate property 531190
Real estate agents 531211
Offices of real estate brokers 531212
Real estate property managers 531310
Offices of real estate appraisers 531320
Other activities related to real estate 531390
Lessors of non-financial intangible assets (except copyrighted works) 533110
Industry Codes - Business services
Business servicesIndustry codes
Data processing, hosting, and related services 518210
Internet publishing and broadcasting, and Web search portals 519130
Computer systems design and related services (including programmers, analysts) 541514
Video game developers 541515
Administrative management and general management consulting services 541611
Human resources consulting services 541612
Other management consulting services 541619
Environmental consulting services 541620
Other scientific and technical consulting services 541690
Advertising, public relations, and related services 541800
Management of companies and enterprises 551100
Office administrative services 561110
Facilities support services 561210
Employment services 561300
Business support services 561400
Travel arrangement and reservation services 561500
Investigation and security services 561600
Other business support services (incl. Online) 561900
Waste collection 562110
Waste treatment and disposal 562210
Remediation and other waste management services 562900
Industry Codes - Education, health or social services
Education, health or social servicesIndustry codes
Schools including business, technical, trade, colleges and universities 611000
Fine arts, athletic instruction and language schools 611600
All other schools and instruction (including tutors) 611690
Non-instructional education services 611710
Nursing and residential care facilities 623000
Individual and family services 624100
Community food and housing, and emergency and other relief services 624200
Vocational rehabilitation services 624310
Child daycare services 624410
Industry Codes - Entertainment or recreation
Entertainment or recreationIndustry codes
Motion picture and video production 512110
Motion picture and video distribution 512120
Motion picture and video exhibition 512130
Post-production and other motion picture and video industries 512190
Sound recording industries 512200
Performing arts companies 711100
Sports teams and clubs 711211
Horse race tracks 711213
Other spectator sports 711218
Promoters (presenters) of performing arts, sports and similar events 711300
Sports stadiums and other presenters with facilities 711319
Agents and managers for artists, athletes, entertainers and other public figures 711410
Independent artists, writers and performers 711500
Heritage institutions 712100
Amusement parks and arcades 713100
Gambling industries 713200
Other amusement and recreation industries 713900
Internet publishing and broadcasting, and Web search portals (including online gambling and pornography) 519130
Other personal services (including Online psychic, escorts, dating, party planning, personal shopping) 812900
Industry Codes - Accommodation, food or beverage services
Accommodation, food or beverage servicesIndustry codes
Traveller accommodation 721100
RV (recreational vehicle) parks and recreational camps 721200
Rooming and boarding houses 721310
Food service contractors 722310
Caterers 722320
Mobile food services 722330
Drinking places (alcoholic beverages) 722410
Full-service restaurants 722511
Limited-service eating places 722512
Industry Codes - Repairs and maintenance
Repairs and maintenanceIndustry codes
General automotive repair 811111
Automotive exhaust system repair 811112
Other automotive mechanical and electrical repair and maintenance 811119
Automotive body, paint and interior repair and maintenance 811121
Automotive glass replacement shops 811122
Car washes 811192
All other automotive repair and maintenance 811199
Electronic and precision equipment repair and maintenance (incl. TV, radio, stereo, computer, camera) 811210
Commercial and industrial machinery and equipment (except automotive and electronic) repair and maintenance 811310
Home and garden equipment repair and maintenance 811411
Appliance repair and maintenance 811412
Reupholster and furniture repair 811420
Footwear and leather goods repair 811430
Other personal and household goods repair and maintenance 811490
Industry Codes - Personal or household services
Personal or household servicesIndustry codes
Carpet and upholstery cleaning services 561740
Services for the elderly and persons with disabilities 624120
Personal care services (e.g. hair, tanning salons, diet centers – non medical) 812100
Funeral services 812200
Dry cleaning and laundry services 812300
Industry Codes - Other services
Other servicesIndustry codes
Automotive equipment rental and leasing 532100
Consumer goods rental 532200
General rental centres 532310
Commercial and industrial machinery and equipment rental and leasing 532400
Photographic services 541920
Travel agencies 561510
Services to buildings and dwellings (incl. exterminators, chimney and window cleaners) 561700
Janitorial services (except window cleaning) 561722
Religious, grant-making, civic, and professional and similar organizations 813000
Private households 814110

Sales – Retailers

Industry Codes - Household goods stores
Household goods storesIndustry codes
Furniture stores 442110
Home furnishing stores 442200
Electronics and appliance stores (incl. TV, stereo, computers) 443100
Industry Codes - Food or beverage stores
Food or beverage storesIndustry codes
Supermarkets and other grocery (except convenience) stores 445110
Convenience stores 445120
Specialty food stores 445200
Beer, wine and liquor stores 445310
Industry Codes - Automotive
AutomotiveIndustry codes
Automobile dealers 441100
Other motor vehicle dealers 441200
Automotive parts, accessories and tire stores 441300
Gasoline stations with convenience stores 447110
Other gasoline stations 447190
Industry Codes - Other retail stores
Other retail storesIndustry codes
Camera and photographic supplies stores 443145
Audio and video recording stores 443146
Home centres 444110
Paint and wallpaper stores 444120
Hardware stores 444130
Other building material dealers 444190
Lawn and garden equipment and supplies stores 444200
Health and personal care stores 446100
Pharmacies and drug stores 446110
Clothing stores 448100
Shoe stores 448210
Jewellery, luggage and leather goods stores 448300
Sporting goods stores (Golf, Ski, Cycling and other) 451110
Hobby, toy and game stores 451120
Sewing, needlework and piece goods stores 451130
Musical instrument and supplies stores 451140
Book stores and news dealers 451310
Pre-recorded tape, compact disc and record stores 451220
Department stores 452110
Other general merchandise stores 452900
Florists 453110
Office supplies and stationery stores 453210
Gift, novelty and souvenir stores 453220
Used merchandise stores 453310
Other miscellaneous store retailers 453900
Industry Codes - Direct sales
Direct salesIndustry codes
Electronic shopping and mail-order houses 454110
Vending machine operators 454210
Direct selling establishments including cosmetics, food or beverages, fuel, household goods and newspaper delivery 454300

Wholesalers - Distributors

Wholesalers – Distributors
Wholesalers – DistributorsIndustry codes
Farm product 411100
Petroleum product 412110
Food 413100
Beverage 413200
Cigarette and tobacco product 413310
Textile, clothing and footwear 414100
Home entertainment equipment and household appliance 414200
Home furnishings 414300
Personal goods 414400
Pharmaceuticals, toiletries, cosmetics and sundries 414500
Motor vehicle 415100
New motor vehicle parts and accessories 415200
Used motor vehicle parts and accessories 415310
Electrical, plumbing, heating and air-conditioning equipment and supplies 416100
Metal service centres 416210
Lumber, millwork, hardware and other building supplies 416300
Farm, lawn and garden machinery and equipment 417110
Construction, forestry, mining, and industrial machinery, equipment and supplies 417200
Computer and communications equipment and supplies 417300
Other machinery, equipment and supplies 417900
Recyclable material 418100
Paper, paper product and disposable plastic product 418200
Agricultural supplies 418300
Chemical (except agricultural) and allied product 418410
Business-to-business electronic markets (Online) 419110
Wholesale trade agents and brokers (not Online) 419120
Other miscellaneous (including Online) 418900
Construction
ConstructionIndustry codes
Residential building construction 236110
Non-residential building construction 236200
Utility system construction 237100
Land subdivision 237210
Highway, street and bridge construction 237310
Other heavy and civil engineering construction 237990
Poured concrete foundation and structure contractors 238110
Structural steel and precast concrete contractors 238120
Framing contractors 238130
Masonry contractors 238140
Glass and glazing contractors 238150
Roofing contractors 238160
Siding contractors 238170
Other foundation, structure and building exterior contractors 238190
Electrical contractors and other wiring installation contractors 238210
Plumbing, heating and air-conditioning contractors 238220
Elevator and escalator installation contractors 238291
All other building equipment contractors 238299
Drywall and insulation contractors 238310
Painting and wall covering contractors 238320
Flooring contractors 238330
Tile and terrazzo contractors 238340
Finish carpentry contractors 238350
Other building finishing contractors 238390
Site preparation contractors 238910
All other specialty trade contractors 238990

Manufacturing

Manufacturing
ManufacturingIndustry codes
Food 311000
Beverage and tobacco product 312000
Textile mills 313000
Textile product mills 314000
Clothing 315000
Leather and allied product 316000
Wood product 321000
Paper 322000
Printing and related support activities 323000
Petroleum and coal product 324000
Chemical 325000
Plastics and rubber products 326000
Non-metallic mineral product 327000
Primary metal 331000
Fabricated metal product 332000
Machinery 333000
Computer and electronic product 334000
Electrical equipment, appliance and component 335000
Transportation equipment 336000
Furniture and related product 337000
Miscellaneous 339000

Natural resource industries

Natural resource industries
Natural resource industriesIndustry codes
Timber tract operations 113110
Forest nurseries and gathering of forest products 113210
Logging (except contract) 113311
Contract logging 113312
Hunting and trapping 114210
Support activities for forestry 115310
Oil and gas extraction 211100
Coal mining 212100
Metal ore mining 212200
Non-metallic mineral mining and quarrying 212300
Support activities for mining and oil and gas extraction 213100
Electric power generation, transmission and distribution 221100
Natural gas distribution 221200
Water, sewage and other systems 221300

Online services

My Account

Using the CRA's My Account service  is a fast, easy, and secure way to access and manage your tax and benefit information online, seven days a week!

You can use either your CRA user ID and password, or your online banking user ID and password to log in to My Account. 

For more information, go to My Account.

Handling business taxes online

Save time using the CRA's online services for businesses. You can do many things online, including:

  • authorize a representative for online access to your business accounts;
  • authorize the CRA to send an email to let you know that you can view a notice of assessment, instead of getting a printed copy in the mail;
  • adjust a GST/HST return;
  • transfer payments and immediately view updated balances;
  • stop or restart the mailing of the GST/HST return for registrants' package;
  • submit account-related  enquiries and get the responses online within 10 business days; and
  • view mail (for example, a notice of assessment).

To register or log in, go to:

Authorizing online access for employees and representatives

Authorize your employees and representatives to have online access to your business accounts so they can quickly get the information they need. Before you can authorize your employees and representatives, they need to register at Represent a Client and give you their representative identifier (Rep ID) or their business number.
Then, to give them online access to your business accounts, you can:

  •  use the “Authorize or manage representatives” service at My Business Account, which may give instant access; or
  •  complete and send Form RC59, Business Consent Form.

You can do one authorization for a group of employees. For more information, go to Represent a Client.

Receive your CRA mail online

You can now choose to receive certain types of mail from the CRA online. When you register for our new service, we will no longer print and mail correspondence items to you. Instead, you will receive an email notification when there is mail for you to view in your secure online account.
You will be able to receive notices of assessment and reassessment, as well as some letters for the accounts you select (for example, corporation income tax and GST/HST accounts). More types of correspondence, including employees; or payroll related mail, will be available online in the future.

Manage online mail

To start getting mail online, register or log in at My Business Account, select the “Manage online mail” service, and follow the easy steps.

Online mail received

To view your online mail, select the “Online mail received” service.
All representatives that you have authorized for online access can also use this service.

View mail

We have renamed the “View correspondence” service to “View mail” service.
With this service, you can view a notice of assessment, letter, or statement up to three years from the date of the item. To access this service, go to:

Electronic payments

Make your payment online using the CRA's My Payment service or using your financial institution's telephone or Internet banking services. For more information, go to Make a payment or contact your financial institution.

For more information

What if you need help?

If you need more information after reading this publication, visit our web site or call 1-800-959-5525.

Forms and publications

To get our forms and publications, go to Forms and publications or call 1-800-959-5525.

Electronic mailing lists

We can notify you by email when new information on a subject of interest to you is available on our website. To subscribe to our electronic mailing lists, go to Electronic mailing lists.

Tax Information Phone Service (TIPS)

For personal and general tax information by telephone, use our automated service, TIPS, by calling 1-800-267-6999.

Teletypewriter (TTY) users

TTY users can call 1-800-665-0354 for bilingual assistance during regular business hours.

Our service complaint process

If you are not satisfied with the service that you have received, contact the CRA employee you have been dealing with or call the telephone number that you were given. If you are not pleased with the way your concerns are addressed, you can ask to discuss the matter with the employee's supervisor.

If the matter is not settled, you can then file a service complaint by completing Form RC193, Service-Related Complaint. If you are still not satisfied, you can file a complaint with the Office of the Taxpayers' Ombudsman.

For more information, go to Service Complaints or see Booklet RC4420, Information on CRA – Service Complaints.

Tax information videos

We have a number of tax information videos for individuals and small businesses on topics such as preparing your income tax and benefit return, and reporting business income and expenses. To watch our videos, go to Video gallery.

Your opinion counts

If you have comments or suggestions that could help us improve our publications, send them to:

Taxpayer Services Directorate
Canada Revenue Agency
395 Terminal Avenue
Ottawa ON  K1A 0L5

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