Business Overhead

What is a Business Overhead?

Business overhead refers to the regular and necessary expenses a company must pay to maintain its operations. This includes expenses like rent, utilities, salaries, insurance, and other costs that are not directly related to the production or sale of a product or service. These costs are usually considered fixed expenses, meaning they do not vary with the level of production or sales.

Business expenses

It’s important to note that the rules around deducting expenses for income tax purposes may vary depending on the type of business you have and the specific expenses you incur. It’s always a good idea to consult with a tax professional or accountant to ensure that you are deducting the appropriate expenses and complying with all tax laws and regulations.

Note :To claim the GST/HST paid or owed on your business expenses as an input tax credit, subtract the amount of the input tax credit from the business expenses. This should be done when the GST/HST for which the input tax credit is claimed was paid or became payable, whichever is earlier. You should also deduct any other rebate, grant, or assistance related to the expense. The resulting net figure should be entered on the appropriate line of your form. If you receive any assistance for the purchase of depreciable property used in your business, it will affect your claim for capital cost allowance.

Note for farmers : If you are unable to use a rebate, grant, or assistance to offset a specific expense or asset’s capital cost, you should report the total amount received on line 9570, “Rebates,” on Form T2042. Additional information on grants, subsidies, and rebates is available on the Canada Revenue Agency website.

Note to business and professional taxpayers: If you are unable to apply a rebate, grant, or other form of assistance to reduce a specific expense or the capital cost of an asset, you should report the total amount in Part 3C at line 8230, “Other income,” on Form T2125. When determining your operating expenses, the following items may be considered:

Rent or lease payments for business premises
Salaries, wages, and benefits paid to employees and contractors
Utilities, including electricity, gas, and water
Insurance premiums for business-related coverage
Advertising and promotion expenses
Accounting and legal fees
Office supplies and expenses
Travel and vehicle expenses related to business activities
Depreciation on assets used in the business
Interest and bank charges
Bad debts and other losses related to the business
Taxes, including income tax, property tax, and business taxes
Note that not all expenses may be deductible, and certain expenses may have limitations or specific rules for deductibility.