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Let us say I have a small corporation in Ontario, Canada and I am an IT contractor through the corporation.

There is a one month gap between contracts, which means I don't earn anything in that time. In that time, I buy a computer and purchase a few courses on programming. Can I write them off?

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Your corporation would file a corporate income tax return on an annual basis. One single month of no revenue doesn't mean much in that annual scheme of things. Total annual revenue and total annual expenses are what impact the results.

In other words, yes, your corporation can book revenues in (say) 11 of 12 months of the year but still incur expenses in all months. Many seasonal businesses operate this way and it is perfectly normal. You could even just have, say, one super-awesome month and spend money the rest of the year. Heck, you could even have zero revenue but still incur expenses—startups often work like that at first. (You'd need investment funding, personal credit, a loan, or retained earnings from earlier profitable periods to do that, of course.)

As long as your corporation has a reasonable expectation of a profit and the expenses your corporation incurs are valid business expenses, then yes, you ought to be able to deduct those expenses from your revenue when figuring taxes owed, regardless of whether the expenses were incurred at the same approximate time as revenue was booked—as long as the expense wasn't the acquisition of a depreciable asset.

Some things your company would buy—such as the computer in your example—would not be fully deductible in the year the expense is incurred. Depreciable property expenses are deducted over time according to a schedule for the kind of property. The amount of depreciation expense you can claim for such property each year is known as Capital Cost Allowance. A qualified professional accountant can help you understand this.

One last thing: You wrote "write off". That is not the same as "deduct". However, you are forgiven, because many people say "write off" when they actually mean "deduct" (for tax purposes). "Write off", rather, is a different accounting term, meaning where you mark down the value of an asset (e.g. a bad loan that will never be repaid) to zero; in effect, you are recognizing it is now a worthless asset. There can be a tax benefit to a write-off, but what you are asking about are clearly expense deductions and not write-offs. They are not the same thing, and the next time you hear somebody using "write off" when they mean "deduction", please correct them.

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  • FYI Some seasonal businesses actually book no revenues 10 or 11 months of the year and then get all of their income over the 1 or 2 month period - this is particularly true of specialist Christmas businesses. They still file on the basis of annual totals. – MD-Tech Nov 11 '15 at 11:53

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