R.9 Keeping receipts - Special Rules for Property Used in A Business

Some receipts are more important than others!

Receipts for property you purchase that is expected to last for more than one year are more important than receipts for things you buy which you will use up within a month or within a year. 

Seeds and soil inputs are things you use up within a year, they are part of the crop you produce each year. Oil and gas for your vehicles are also things you use up as you go. 

When you spend money on things that are used up during the year, those things are called expenses. 

Property such as machinery and equipment is usually expected to last more than a year. It is especially important to keep receipts for these types of purchases because they are special rules for how they are reported in your books and on your tax return.

In the language of taxes and bookkeeping, property used in a business, and expected to serve the business for more than a year is called assets. 

• Machinery is an asset. The fuel you put in the machinery is an expense. 
• Equipment is an asset. The amount you pay someone to repair a piece of equipment is usually an expense - but if they essentially re-build the equipment and give it a whole new useful life, then the amount you pay the person would be treated as if you bought a new piece of equipment. 

When in doubt, keep the receipt and write a detailed note so you can discuss what it is for with your bookkeeper or tax preparer.