07-14-2020, 09:51 PM
(07-14-2020, 09:05 PM)ijmorlan Wrote:(07-14-2020, 07:13 PM)panamaniac Wrote: I know that advertising is a deductible business expense (i.e. you pay to advertise your business), but I would not see the basis for a deduction when third party advertising is placed on you car to generate income.
In order to earn the advertising income, I would hypothetically incur expenses. So if I were paid to drive around the city showing the advertising, I would expect the gas and maintenance to be deductible. But in this case, I think the idea is that one is driving around anyway so there wouldn’t be additional expenses. If the contract specified frequent carwashing, though, that might be deductible.
I used to work for the CRA so I do have a little insight. Really two things come into play...1) How much, money wise, are you writing off. 2) How much income are we talking about? People could write off 100%, technically. However, writing off 100% puts you at an audit risk. However, if you're driving around in a 2010 Jetta and writing off 100% of $2,000 in expenses against $3,000 in 'business' income, they'll probably let it go. However, if you are writing off, say 100% of $15,000 in expenses against $3,000 in income, and reporting a loss of $12,000 (which reduces your actual T4 income), then that could very well trigger an audit.
If one was smart, they'd not write off more than 50% of that extra income (we'll say of $3,000), and keep expenses to around 50% (so that 50% is business, and 50% is pleasure), to reduce audit risk.
It really is a grey area though. If one wanted to be safe and eliminate audit risk, just don't expense it out.