 Deduction
Details - Advertising vs. Promotion vs. Promotion vs. Entertainment
By Debbie Patterson - Odessey Business Services
When it comes to separating and keeping receipts for taxes, confusion can result in the
double use of the word “Promotion”. Here is some clarification for the
category names.
Advertising & Promotion: 100% deduction -
The advertising portion of this category would be any paper, media, television, radio,
flyers or low cost signage promoting your business or an event being held to promote your
business. Any high cost signs would be depreciated as an asset.
The promotions portion of this category includes business cards, as
some would find this a means of advertising, though this can also fall under office
expenses. Also filed in this category are any expenses to self-promote your company such
as pens, hats or clothing that you would give to clients. Expenses to exhibit at a
tradeshow are also an advertising and promotions expense. Any props needed for the
advertisement of your business can be deducted from income.
Entertainment & Promotions: 50% deduction -
This category is known under several names, but all mean the same thing. It is to expense
meals and entertainment used to entertain clients for your business. The first mistake
made is that people think they can run out to Wendy’s for lunch and write it off. You
cannot expense personal meals as we all need to eat and the government will not let you
write this off even if you are self-employed. (If you are eating this meal at least 40kms
from your home base while travelling to, during or from seeing a client, this can be
expensed under travel.) All expenses in this category are deducted at only 50% on the tax
return. Other than meals, other promotional expenses such as gifts for clients are also
expensed here. Some noteworthy information for the golfers. Meals before and after golfing
may be expensed as they could be incurred in the transaction of business, but any green
fees, cart rentals, and driving range expenses will not qualify for the deduction.
An expense often not used to it’s fullest benefit under this
category is special promotional events. Up to six or fewer special events can be held
during the calendar year and deducted fully. This includes amounts incurred by the payer
for food, beverages or entertainment that is generally available to all employees. For
example, a Christmas party which is put on by the company as well as in Calgary - the all
famous Stampede party - would fall under this 100% deductible portion of entertainment.
Also falling under the 100% deduction in this category are amounts related to a fund
raising event, the primary purpose of which is to benefit a registered charity.
Part 2 will clear up any misunderstanding between an expense and an
asset for big ticket purchases before year end.
Debbie Patterson, owner of Odessey Business Services,
specializs in income tax. Visit www.odesseybusiness.com for more tax tips or contact
her directly at 403.816.5098 |
