The portion of that computer you use for business is tax deductible. If you claimed the entire cost, you shouldn't be using it for personal use.
And in Canada, computers are capital (not expenses), which means you deduct a portion of the original purchase price annually until there is $1 remaining. I think they're CCA class 8, which is 30%.
It is deductible because it is an expense; if it isn't an expense (a negative cost), you shouldn't be deducting it.
And in Canada, it has to be wholly used for business in order for the square footage to be deductible. Comingled space (using the dining room table for business) means it's not eligible. And it also has to be an expense that's deducted. e.g.: my home office is 5% of the square footage, so I can deduct 5% of my heating and electricity expenses. We don't have a mortgage, so that's about it. Expenses for utilities come to about $250/yr.
Yes, the business use of items is deductible. But you wouldn't be doing/using that stuff for business otherwise. You should not be deducting all your phone costs, for example, if you only call clients once a month.
This is probably one of the 4 most common frauds I have seen for home based businesses. Phone, meal, car, clothing, in that order. I recommend getting a business account to keep things clear when audit time comes. Otherwise, if you're not logging calls, and your revenue is very small, CRA has good reason to demand proof that the phone is used for business at all and without it, rejection is likely.
When I was a frontline agent at the phone company, I would estimate that about half the 'small businesses' (less than 5 employees) deliberately and with full knowledge moved all their personal phones into a business account in order to expense them in the business name. e.g.: a sole prop engineer who has 1 phone she uses for both personal and business puts her husband's phone, three kids' phones, all on some sort of shared plan with one bill in the business name and expensed the whole thing.
They wouldn't be personal expenses when you used them for business if you weren't in business. If you weren't in business, you wouldn't be using the phone as much, the computer as much or anything else.
The only possible exception I can really think of is meals, but that mechanism dries up pretty quickly if you are actually using dining events to promote business. There is no way to justify having friends over to discuss possible sales week after week with no significant sales. That somebody would suggest this is a smart business model with a straight face is why most of the world really feels sorry for Amway salespersons. Having friends over is a business expense. What a big bag of sadness.
So long as the car is used for business purposes, this is fine. If you are simply saying it's for business and then using it for personal stuff, the company is committing tax fraud.
In Canada, if you have a business fleet car, it is assumed to be 100% business use. Non-business use would be evidence of fraud (I think there is an informal 5% mileage allowance for personal use of employees if they are allowed to take the vehicles home after work, and emergencies).
For a personal car, you can expense against proportional mileage, you have to keep a log. i.e.: if you drive it 10% for business, you can expense 10% of the lease, maintenance, gas.
I am aware of them, and many more. I am also aware that small business people abuse the idea, either because they do not understand it or because they are willfully participating in fraud.
My dad and I grew up among entrepreneurs and small business owners and we really felt like outsiders because of how they all took this systematic petty larceny for granted as a good thing. He turned down a few partnership opportunities because their casual pride in having a bag of tricks to defraud the customer, suppliers, and taxman, made him predict he would simply be the next mark.
Here's one my childhood friend told me about a few years ago. They own a cluster of grocery stores here in Vancouver. On Friday and Saturday afternoons the crowds are so dense they are not worried about losing customers, so they shut off the Point of Sale devices and say "debit machine is down, cash only please". Those sales are not logged. The inventory is marked 'spoiled'.
However, CRA is getting suspicious (a similar business they know about is being audited) because of the regularity and because POS systems are actually pretty reliable. They were considering software that is designed to fudge the numbers for Integrated POS/PC registers, but that hit the news lately and he's thinking that particular gravy train may be over as well. Total fraud over the last ten years could be close to a million.
In any case, what's worth pointing out about the claim in the OP is that all of these 'expenses' we're discussing are probably not even what he's talking about... they are not listed in his business expenses. If he had auto expenses, they would have been listed as "auto expenses: $500" - something like that.
What the author mentioned were vague 'incentives' which tells readers nothing. We would need to know more about those to understand how it relates to that tax refund. As a poster pointed out above, for an $815 loss to generate $1594 less taxation, the tax rate would have to be over 200%, which is clearly impossible. Whatever the truth is, it's not revealed in his blog. Bottom line: I think he's fully aware that anybody in this scenario really lost money and is lying to recruit down streams.
The other possibility is that he may have carried several years of losses forward (In Canada, you can do that for up to 7 years), but again, why wouldn't he mention that since it's pretty material to the calculation. I think it's safe to assume this isn't what happened.
I actually do an exercise like this each year: I calculate my taxes with and without my corporation's contribution to my income (I am compensated through special dividend rather than wage). I'm not going to post my "total tax refund" - I'm interested in the *difference* attributable to the business, that way I know a bit more about how much the business is providing me, exactly, when I consider how much time I spend running it. If the net after tax income was less than $10/hr I would close the business immediately.
So my guess is that the author is not calculating the difference between the with and without business tax refund. I would expect that if he's using the $815.44 to offset a median Canadian wage in the 25% income tax bracket, he's reduced his tax burden by about $200. Meaning, his $2200 refund is now $2400. Down $800, up $200, he's made a real net loss of $600 in 2013 from the business.
(don't tell 'em!) 