Ask Allan Forum
Get expert answers to your tax questions straight from Allan, our owner and experienced CPA. It’s free, direct, and designed to help you make the best decisions when it comes to your taxes.
I sold a product (engraving on a board) during Christmas and was given a T4A from a client. Is it possible to deduct the cost of the product on the income tax. I paid over $1000 for the product so in reality I did not earn the full amount on the T4A
Hi Ms. M,
Yes, in most cases you can deduct the costs you incurred to earn the income shown on the T4A, so you’re generally taxed on your net profit (income minus expenses), not the gross amount on the slip.
How it’s typically reported:
- The amount on your T4A is reported as part of your business / self-employment income.
- You can generally deduct related costs such as:
- the cost of the board / materials (cost of goods sold),
- engraving supplies,
- packaging and shipping,
- marketplace or payment processing fees (if any),
- and other reasonable expenses directly related to earning that income.
One important detail:
If the $1,000+ amount you mentioned was for materials/product you sold, it’s normally deductible as part of your costs. If instead it was for a tool/equipment used to produce items (e.g., an engraving machine), that is usually claimed over time as depreciation (CCA), rather than a full deduction in one year.
If you can confirm what the $1,000+ cost was for (materials vs equipment) and whether you have any other similar sales during the year, we can point you to the cleanest way to report it.
Regards,
Allan Madan, CPA, CA
Madan CPA Professional Corporation