As summer starts winding down, the vacations start to wrap up, and work and school move back into full swing, it’s back to the good old routine for many Canadians.
The resumption of everyday workplace habits usually means more coffees, social networking lunches, wine, and dining experiences, and figuring out how much should be spent on these activities might leave many asking questions. Couple this with the uncertainty of what’s eligible for tax deductions and it doesn’t take long for the confusion to set in.
Which is why, this month, we’re focusing on breaking down your spending and deductions so that you can plan accordingly now that it’s back to the daily grind.
Know and Track Your Expenses
Firstly, it’s important to consider the financial aspect of resuming your day-to-day practices. In light of this, budgeting is a term you’ll become all too familiar with if you haven’t already.
For example, let’s start with our daily caffeine fix – coffee. The average Canadian spends around $6.74 daily on their favourite hot beverages. This adds up to over $160 per month. While this seems insignificant, it forms a significant chunk of your salary in the long run.
Lunch bills provide an even more substantial figure. Canadians typically shell out an average of $10 – $13 per meal when dining out. As the number of working days per month typically ranges between 20-23, it roughly totals around $200 – $300 monthly.
Lastly, when moving onto after-work drinks and dining, it’s very common to spend more than anticipated as these outings tend to serve as stress-busters. On average, Canadians spend about $200-$250 per month on dining-out, including alcohol.
Taken together, these splurges start looking like a considerable expenditure, worth hundreds of dollars each month.
However, budgeting and planning can help monitor, control, and ensure it does not hit the roof.
Apps available today, such as Mint and PocketGuard, are great tools to keep track of expenditures, so consider investing in a good finance tracking app if you’re looking for an easy way to keep tabs on where your money is going.
Understand What’s Deductible
When it comes to tax deductions, the Canada Revenue Agency (CRA) has stringent conditions under which meals and entertainment expenses can be written off.
For a business, meals tend to be deductible as long as they’re (1) directly related to generating income for the business, and (2) there is a clear benefit to the business as a direct result of the meal/outing.
Routine lunches or coffee breaks won’t count for deductions unless it’s a business meal with a client or potential customer.
While entertaining clients, 50% of the cost can usually be deducted, but there are exceptions where it could even be 100%. This may include events established for fundraising for a registered charity.
Remember to document such expenses meticulously with details including dates, attendees, plus the business purpose of the outing.
In contrast, tax deductions are relatively limited for employees.
Costs related to travel, meals, and accommodation are usually covered by the employer. However, if they’re not, they’d only be eligible for deductions if they fall under strict outlines such as travel and work-related expenses that pertain to the job (which does not include commuting).
Need Advice? We’re Here for You
While heading back to your routine might mean more coffees, lunches, and wine and dining, it’s important to remember to budget and spend wisely.
Moreover, carefully consider what expenses may be deductible according to Canadian tax law and ensure to keep accurate records of these expenses. By staying ahead of your expenses and fully understanding tax deductions, you can save money where it matters most.
For more information and insight into your budget, spending, and deductions, reach out to us at Isaac Achal Professional Corporation. One of our knowledgeable and experienced Chartered Professional Accountants would be happy to assist in creating a financial plan that works best for you.
