Ask an Expert
Claiming food expenses
Expert: Julie King
I run a private home daycare an am looking for information on how to claim the food I buy on my taxes. I heard there is a formula but I can't find one and I keep receipts but sure missed lots too.
Julie King answered:
You will find information in this article helpful: http://www.canadaone.com/ezine/jan05/canadian_tax_basics.html.
It explains what valid business expenses are; in your case, the portion of your food bill that applies to the daycare would be deductible.
A special formula is used to calculate how much you can claim for meals and entertainment expenses. Typically you cannot claim more than 50% of your food expenses. However, a CRA bulletin explains that there is an exception to this rule when "your business regularly provides food, beverages, or entertainment to customers for compensation (for example, a restaurant, hotel, or motel)". You'll find a detailed explanation here: http://www.cra-arc.gc.ca/E/pub/tp/it518r/it518r-e.html#P48_3894.
You should check with your accountant to confirm that you will be able to deduct 100% of food expenses that related to the daycare. (Not surprisingly, you will not be to deduct the cost of food purchased for personal use.)
Given your question, a good accountant should also be able to help you save more money at tax time and can also help you with guidelines for record keeping when home and business expenses are mixed. Some people are concerned about the cost of using a professional, but the cost of not using one can be much greater if you do not have a strong background in tax accounting.
About the author
Julie King is the co-founder and managing editor of CanadaOne, Canada's first small business portal.