Guidance on Deducting Home Office Expenses

One of the benefits of having a home based business (for freelancers, self employed contractors and small business owners) is that you can deduct the expenses relating to the space that you use to work.  This can result in a reduction in your tax bill for costs that you would incur regardless, which is certainly an incentive to being your own boss.  

Criteria for Deductibility:

For home office expenses to be deductible, they have to meet the following criteria: 

  • It has to be your principal place of business i.e. you cannot deduct home office expenses if you have another office that relates to your business, elsewhere, even if you work 22 hours a day or you check your blackberry in bed.

  • The space designated as your home office is used to earn business income and/or you meet clients or customers on a regular basis. You can deduct expenses relating to the workspace in your garage which is used for home improvement projects.

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Excel for Small Business Owners

As a confirmed excel nerd, there is something about large amounts of data that I am inextricably drawn towards . I suppose it has something to do with an affinity for organization combined with a love of numbers and the innate desire to solve problems. As an accountant and financial consultant , I am often presented with the task of organizing and analysing data into a format that allows for greater insight into my clients businesses . And although good accounting software is absolutely necessary for any small business owner, a significant amount of analysis and reporting is done most effectively in excel.

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How to Update Quickbooks for the 2011 QST Rate Increase

Update:  As of January 1st, 2012 the Quebec Sales Tax (QST Rate) which had gone up from 7.5% to 8.5% on January 1, 2011 will now increase to 9.5%.  The effective sales tax in Quebec will go up from 13.925% to 14.975%.  Since QST is calculated on the net amount + GST, the effective rate is actually 14.975% (and not 14.5%) .  In other words the effective QST rate is 9.975%.  The instructions below are equally applicable, except the new QST rate to enter is 9.5%.

On January 1st, 2011, Revenue Quebec will be increasing the QST rate to 8.5% (yay!), bringing the effective rate of QST to 8.925% andtotal sales taxes (GST and QST) to 13.925% (since the QST is actually charged on the net price + GST.)  This will impact anyone who charges QST including small businesses and self employed individuals, and invoicing software and processes should be updated to reflect the change.   Suffice it to say that there are no major changes in the application of the rates.

For those of you using Quickbooks you will need to update the QST being charged on both sales and purchases.  The goal is to make a copy of the already existing QST on Sales and QST on purchases items, which will maintain the old rate.  Once this is done the existing "items" should be updated with the new rate.  This will automatically feed into and update the sales tax codes, so that you do not have to re-create them.  Keep in mind that this should be done on January 1st, 2011 or first day back after the holidays, so that transactions prior to 2011 are not affected.  The following are the steps required to make the change:

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Guidance on Working from Home

Having a home based business has many advantages -  there's no soul sucking commute to and from work, waking up hours are flexible and it allows us to work when we are at our most productive or creative.  Also, it is tax deductible.  It can, however, also present a unique set of challenges.  Given the proximity of distractions including our beds, fridge and tv, even our primary work tool i.e. our computers, it requires a great deal of discipline and focus to actually get any work done. Below are three articles that provide some guidance on how to successfully maintain a home office:

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