Fees, penalties, or bonuses paid for a business related loan
You can deduct the fee you pay to reduce the interest rate on your loan. You can also deduct any penalty or bonus a financial institution charges you to pay off your loan before it is due. The loan must be related to your business activities. Treat the fee, penalty, or bonus as prepaid interest and deduct it over the remaining original term of your loan. For example, if the term of your loan is four years and in the second year you pay a fee to reduce your interest rate, treat this fee as a prepaid expense and deduct it over the remaining term of the loan.
Fees deductible over five years
You can deduct certain fees you incur when you get a loan to buy or improve your business property. These fees include:
- application, appraisal, processing, and insurance fees;
- loan guarantee fees;
- loan brokerage and finder’s fees; and
- legal fees related to financing.
You deduct these fees equally over a period of five years, regardless of the term of your loan. Adjust the fee accordingly if the period is less than 12 months.
If you prepay the loan before the five years is up, just deduct the remaining fees in the year you paid off the loan.
Business tax, fees, licences, dues, memberships, and subscriptions
You can deduct all annual licence fees and business taxes you incur to run your business. You can also deduct annual dues or fees to keep your membership in a trade or commercial association.
Some examples are:
- Standy charges
- Guarantee Fees
- Service Fees
- Direct Sellers Licence
- Chamber of Commerce
- Networking Organization
- Newspaper, magazine related to your business
- Costco if used to purchase business related items.
You cannot deduct club membership dues (including initiation fees) if the main purpose of the club is dining, recreation, or sporting activities.
You can deduct from business income any expenses incurred to engage a professional. A professional would include an accountant, lawyer or engineer. The work they do must related to your business and includes advice.