What Are Input Tax Credits (ITCs) and How Do You Claim Them?

What input tax credits are, which purchases qualify, and how your Mesa CPA bookkeeper claims them automatically through QBO.

An Input Tax Credit (ITC) is the GST/HST you paid on a business purchase that you can claim back from the CRA. It is how the government prevents sales tax from stacking up — businesses recover what they paid, and ultimately only the end consumer bears the cost.

If your business is registered for GST/HST, ITCs are one of the most direct ways to reduce your tax bill.

How ITCs Work

When you buy something for your business that includes GST/HST, you have paid tax on that purchase. As a registered business, you can claim that amount back on your GST/HST return — effectively offsetting the tax you collected from your own customers.

Simple example:

	Amount
GST/HST collected from customers	$2,000
GST/HST paid on business purchases (your ITCs)	-$800
Net amount remitted to CRA	$1,200

If your ITCs exceed what you collected in a period (common for new businesses or businesses with large purchases), the CRA owes you a refund.

What Qualifies for an ITC

To claim an ITC, the purchase must be:

For business use — not personal use
A taxable supply — purchases that were GST/HST-exempt or zero-rated do not generate ITCs
Supported by documentation — you need a valid receipt or invoice with the supplier's GST/HST number

Common ITC-eligible purchases:

Office supplies and equipment
Software and subscriptions
Business rent
Professional fees (legal, accounting)
Business meals and entertainment (50% of the GST/HST, since only 50% of the expense is deductible)
Vehicle expenses (business portion only)
Advertising and marketing

What does not qualify:

Personal expenses
Purchases for exempt activities (e.g., if you provide exempt financial services)
Club memberships, golf, and certain entertainment

How to Claim ITCs

You do not claim ITCs separately — they are part of your regular GST/HST return.

When your Mesa CPA bookkeeper enters your business expenses in QBO with the correct tax codes, QBO tracks the GST/HST paid automatically. When it is time to file your return, QBO totals:

Line 103: GST/HST collected
Line 106: ITCs (GST/HST paid on purchases)
Line 109: Net tax (what you remit or what you are owed back)

As long as expenses are entered correctly and receipts are kept, your ITCs are captured automatically.

Documentation Requirements

The CRA has specific documentation rules for ITCs based on the purchase amount:

Purchase amount	What you need on the receipt
Under $30	Amount paid and an indication GST/HST was paid
$30–$149.99	Supplier name, date, total, GST/HST amount (or statement that tax is included), your business name or the purchaser's name
$150 and over	All of the above, plus the supplier's GST/HST registration number and a description of the goods/services

Keep all receipts for 6 years. Digital copies (photos, PDFs) are acceptable.

Abnormal Procedures

You have a receipt but the supplier's GST/HST number is not on it.

For purchases over $30, you are technically required to have the supplier's number to claim the ITC. In practice, if the supplier is clearly registered (a major retailer, a professional firm), the CRA usually accepts the purchase. For large amounts, it is worth asking the supplier to reissue the receipt with their registration number.

You made a purchase that was partly personal, partly business.

You can only claim the ITC on the business portion. For example, if you use your phone 70% for business, you can claim 70% of the GST/HST on your phone bill as an ITC. Your bookkeeper will prorate accordingly.

You forgot to claim ITCs in a past period.

You can claim missed ITCs on a future return — generally up to 4 years back. Let your Mesa CPA bookkeeper know and they will include the missed credits in your next filing.

FAQ

If I am not registered for GST/HST, can I claim ITCs?

No. ITCs are only available to GST/HST-registered businesses. This is one of the reasons some businesses register voluntarily before hitting the $30,000 threshold — if you have significant startup expenses with GST/HST, registering early lets you recover those amounts.

What is the difference between an ITC and a tax deduction?

A tax deduction reduces your taxable income (which reduces your income tax). An ITC directly reduces your GST/HST remittance — it is a dollar-for-dollar recovery of sales tax paid. They are two separate benefits that both apply to legitimate business expenses.

Does the GST/HST Quick Method affect ITCs?

Yes. If your business uses the Quick Method (a simplified remittance calculation for businesses under $400,000 in annual taxable revenues), you remit a flat percentage of your sales instead of tracking individual ITCs. In exchange, you get a credit but generally cannot claim full ITCs on most purchases. Your Mesa CPA advisor can determine whether Quick Method is beneficial for you.

Do I claim ITCs on purchases made with a personal card?

Yes, as long as the purchase was for business purposes and you have a valid receipt. The payment method does not affect eligibility — what matters is that the expense was for the business.