Cam I claim bike gear on my company taxes

[victorbrca]

Hi guys,

Just went into contracting and I was wondering if I can claim my gear as company costs? Anyone does that?

Thanks.

 

[AF4iK]

Good question. I'd like to know as well. I'll ask the accountant when I do my taxes.

 

[iav8]

My best guess is "no"! I am a snowboard instructor in the winter. I was told that None of my equipment can be deducted. Even the uniform rental, which I must pay in order to work and cannot be used for personal purposes, is not deductible. if there are any tax pros out there that can tell me I am wrong, please speak up quickly... I'll be doing my taxes this weekend :-(

 

[promac]

Hi guys,

Just went into contracting and I was wondering if I can claim my gear as company costs? Anyone does that?

Thanks.

That's an interesting question. To what extent is your bike gear required to earn business income? Do you consider your bike personal or business property? Could your business be considered a personal services business?

If you are an independent contractor and not a personal services business (really an employee), a better way to cover the cost of your gear is through tax deductible mileage reimbursement of $0.53/km for the first 5,000km and $0.47/km for any excess business related kilometers travelled. Keep a detailed log to support your claim. If you're a personal services business or an employee, your employer should reimburse business related travel at or near the rates above. Travel from home to place of employment and vice versa are considered by CRA to be personal kilometers.

Otherwise, any personal use of business property would be considered a taxable benefit or worse, an appropriation (taxable to you and taxable to business, so taxes + interest & penalties can exceed cost of the gear). Problem is, bike gear will appear to be a personal expense.

 

[OpenGambit]

The answer is maybe.

You can probably get away with deducted a portion of your bike gear. you would want to divide the time riding for work by your total riding time and multiply that by your bike gear cost. It should be essentially the same calcuation as your vehicle tax deduction off.

Now.. thats assuming that you ride as part of your business ( you have no equipment? )

That being said. expect to get some flak at audit stage for it.

 

[OpenGambit]

My best guess is "no"! I am a snowboard instructor in the winter. I was told that None of my equipment can be deducted. Even the uniform rental, which I must pay in order to work and cannot be used for personal purposes, is not deductible. if there are any tax pros out there that can tell me I am wrong, please speak up quickly... I'll be doing my taxes this weekend :-(

were you told by a court?

 

[gnatwest]

My best guess is "no"! I am a snowboard instructor in the winter. I was told that None of my equipment can be deducted. Even the uniform rental, which I must pay in order to work and cannot be used for personal purposes, is not deductible. if there are any tax pros out there that can tell me I am wrong, please speak up quickly... I'll be doing my taxes this weekend :-(

That is incorrect. You can deduct your rental and you can deduct your equipment. If it is required to do your job you can deduct it. It is the same as a mechanic deducting tools.

 

[nobbie48]

Somewhere ages past I read about country and western performers choosing hidious outfits because they could claim them as costumes not practical for wearing other than on stage.
I've never heard of an office worker being able to claim their clothing. The key would be to have the item classified as equipment. The government would want it classified as clothing to eliminate the deduction.
The OP doesn't state the nature of the business. If the usage is contrived the deduction will be denied. If claiming a mileage reimbursement the gear might be considered part of the vehicle package. If a cager doesn't get special attire allowance why should a biker if the bike is only a personal choice?
I wonder if a nudist could claim for clothing as it's not a personal choice but rather something required for work.

 

[victorbrca]

I'm only asking because I'm new at this. I just opened a incorporation for a new job (IT consulting), and I will be riding 90km each way to work. So I was wondering if I could have my gear as part of the expenses.

I wonder if a nudist could claim for clothing as it's not a personal choice but rather something required for work.

Good point.

 

[OpenGambit]

Somewhere ages past I read about country and western performers choosing hidious outfits because they could claim them as costumes not practical for wearing other than on stage.
I've never heard of an office worker being able to claim their clothing. The key would be to have the item classified as equipment. The government would want it classified as clothing to eliminate the deduction.
The OP doesn't state the nature of the business. If the usage is contrived the deduction will be denied. If claiming a mileage reimbursement the gear might be considered part of the vehicle package. If a cager doesn't get special attire allowance why should a biker if the bike is only a personal choice?
I wonder if a nudist could claim for clothing as it's not a personal choice but rather something required for work.

your analysis isn't correct.

whether its equipment or not doesn't matter.

All business expenses, are analyzied on whether the expense is incurred for ther purpose of earning business income.

There are many cases and clothing and in many cases it is denied.

However, your thinking on saying that cagers don't get a clothing allowance is missing the point, there is no restriction on the cage that you buy, you can deduct your beemer the same way you can deduct your hyundai, if you got the option with the HIDs on your car, that doesn't make it less deductable, therefore, there is certainly personal choice allowed within the ITA.

Keep in mind however, that because your gear is "capital property" you may only be able to depreciate a % of it every year. The amount might become so small that it simply isn't worth it. That %, combined with the % you have to take because you dont only use your bike in connection with earning business income, makes the amount pretty miniscule in my opinion, and more effort than the math is worth.

a key assumption in all this is that you are actually an independent contractor. No dont' tell me your facts, I don't want to know.

 

[Tango5]

I'm only asking because I'm new at this. I just opened a incorporation for a new job (IT consulting), and I will be riding 90km each way to work. So I was wondering if I could have my gear as part of the expenses.



Good point.

I worked under my own corporation and I recently dissolved my corporation, my personal experience is that what you can deduct is fairly limited, especially in a situation where you have a corporation for the sole purpose of offering your services to a single company. In some cases the CRA will disallow many deductions because they consider you an employee and not an independent contractor. IMO, Speak to your accountant, the implications of deductions you attempt can have other financial consequences when you file your corporate income tax and your personal income tax. In general I did not find incorporation to be as advantageous as I had imagined, it works best when you earn way more money than you can use

 

[promac]

Rough & dirty, a $30,000 automobile & related fuel, maintenance, insurance & amortization is fairly represented by an operating cost of $0.47/km traveling at least 20,000km or more per year. If you charge your company $0.47/km for mileage on a $15,000 bike & gear, you're going to end up further ahead than if you capitalize the bike & gear and expense the fuel, maintenance & insurance, because those deductible costs will be much less per year.

While using corporate funds to purchase a bike & gear would have it's advantages, the danger in being reassessed by CRA, is not worth it. They will consider it an appropriation of company assets and reassess you and the corporation additional tax & penalties, maybe even criminal charges. Good tax lawyers will charge $400+ per hour to defend your nonsense.

 

[boarder360]

My best guess is "no"! I am a snowboard instructor in the winter. I was told that None of my equipment can be deducted. Even the uniform rental, which I must pay in order to work and cannot be used for personal purposes, is not deductible. if there are any tax pros out there that can tell me I am wrong, please speak up quickly... I'll be doing my taxes this weekend :-(

I worked as a snowboard instructor also and always claimed any new boards, bindings etc etc.

 

[iav8]

were you told by a court?

No, just other snow pros that I work with.

That is incorrect. You can deduct your rental and you can deduct your equipment. If it is required to do your job you can deduct it. It is the same as a mechanic deducting tools.

If I were certain about this, I would do it. Having been "reassessed" in the past, I hesitate in stretching any tax rules. As I understand it the "tools" deduction is up to $500 on amounts over $1000. Better than nothing though.

...the danger in being reassessed by CRA, is not worth it.

Agreed, it is a real pain to deliver all the evidence in support of a deduction claim. I was reassessed following my move from Quebec to Ontario. Every detail was questioned and some of my deductions were denied. Fortunately, I found receipts for other related expenses that I missed and did not have any penalty. It wasted a lot of time. Once bitten...

I worked as a snowboard instructor also and always claimed any new boards, bindings etc etc.

Some pros at my Snow School also claimed those costs, but I took the word of others that I trust.

In the hope of offering something sustantial to the thread, I looked to Revenue Canada for the detail on this question and found this quote (Employment Expenses 2011 http://www.cra-arc.gc.ca/E/pub/tg/t4044/t4044-e.html):

You cannot deduct the cost of special clothing you wear or have to wear for your work. You cannot deduct the cost of any tools that are considered to be equipment.

From that I would gather that the travel on the motorcycle would be deductable under the "Motor Vehicle Expenses" rule, but the riding gear would not. Then again, I am a snowboard instructor not a tax professional...
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[OpenGambit]

That guide is for employees...

 

[iav8]

That guide is for employees...

Yes, good point. I lost sight of the OP root question and researched my own. If you have your own business then the rules might be quite different.

 

[promac]

If you bought a POS bike for $2,000, spent $1,500 on insurance, $1,000 on gear and another $1,500 on maintenance & repairs, you'd be out-of-pocket $6,000. If business related travel amounted to 10,000km, you could recover $5,050 (5,000x.54+5,000x.47) pretax from the company. At the end of the year, I'd be out-of-pocket only $950. The next 2 years, I'd be in-the-money $2,050, each year. Then the cycle would probably repeat itself with the purchase of another POS bike & new gear. Contrast that to $5,050 in wages taxed at up to 46.41% netting you only $2,706.30. It is possible to make money if you're smart about it and keep a mileage log book.

 

[OpenGambit]

If you bought a POS bike for $2,000, spent $1,500 on insurance, $1,000 on gear and another $1,500 on maintenance & repairs, you'd be out-of-pocket $6,000. If business related travel amounted to 10,000km, you could recover $5,050 (5,000x.54+5,000x.47) pretax from the company. At the end of the year, I'd be out-of-pocket only $950. The next 2 years, I'd be in-the-money $2,050, each year. Then the cycle would probably repeat itself with the purchase of another POS bike & new gear. Contrast that to $5,050 in wages taxed at up to 46.41% netting you only $2,706.30. It is possible to make money if you're smart about it and keep a mileage log book.

I don't see why you are comparing the travel expense way to the employee way( at the highest rate especially ) , it should be compared the other ways of deduction.

 

[promac]

I don't see why you are comparing the travel expense way to the employee way( at the highest rate especially ) , it should be compared the other ways of deduction.

Because the other methods involve excessive tax risk and involve actual costs. The mileage method gives you more than on a cost recovery basis, on average, for a new vehicle under $30,000. CRA only cares about the mileage log book and legitimate business related miles - they don't care what you drive.