I am self-employed and attended a trade show in another city where I met with clients. I traveled there with another self-employed individual who I often work with. I paid for the airfare out of pocket, but was later paid back an equal amount by this other individual.
Do I need to include the "reimbursement" amount in my income? If so, am I still able to claim the airfare as a travel expense?
The person who paid me just treated the payment in the same way they would if I had been doing other contract work for them. Seeing as they are also self-employed, would that mean their payment to me would not technically qualify as a "reimbursement" anyway, at least in the legal sense?
The first condition of reimbursements, as defined by the CRA, states that "the reimbursement is paid to an employee, partner or volunteer", and I am not any of these three things. I am simply a friend of the person, and they insisted that I should attend this trade show to the point that they paid me back for what I spent on the plane ticket.
If that is the case then it seems like I would need to claim the amount as income, however I would still be able to write off the airfare amount as a travel expense so that I'm not paying tax on the amount that was not part of my net income.
Is that correct?
Thanks.
The reimbursement does not have to be claimed as income. It cannot be reported as a deduction because in the end, you did not incur the expense. The individual who paid it will undoubtedly be claiming the expense and it is a valid expense to the other person.
The reimbursement does not have to be claimed as income. It cannot be reported as a deduction because in the end, you did not incur the expense. The individual who paid it will undoubtedly be claiming the expense and it is a valid expense to the other person.