As a small business owner, you should ensure that you are claiming all allowable tax deductions to reduce your business' taxable income and tax payable. Here are seven tax write-off tips for small businesses in Canada to help keep more money in their pockets:
Generally, all businesses can deduct these expenses on their tax returns as long as these expenses are incurred to earn business income.
1. Home-Based Office Expenses
Home office expenses is the most common tax deduction for small businesses in Canada. In order for your home office to qualify for business-related deductions, it must be your principal place of business or must be used exclusively for business. You can deduct a portion of your expenses, including power, heat, water, property tax, home insurance and mortgage interest or rent.
To determine the amount that you can deduct as a business expense must be proportionate to the actual space that you are using in your home for your business.
2. Vehicle Expenses
Another common tax deduction for small business is vehicle expenses. If you use a vehicle for your business, you can deduct costs related to that vehicle:
Maintenance and repairs
insurance
Parking and fuel
Capital Cost Allowance for owned vehicles
Lease payments for leased vehicles
Registration fees
If you are using the same vehicle for personal use, you can only deduct the percentage of those expenses related to when the vehicle is used for business purposes. To avoid any trouble with Canada Revenue Agency (CRA), we recommend that you use a logbook to differentiate between personal use and business use.
If you are self-employed, using your vehicle to and from work is not a deductible expense. Interested to learn more, read our article: Motor Vehicle Expense Rules for Canadian Business
3. Professional Fees
Small businesses can deduct expenses incurred for external professional services (accountant, lawyer, etc.)
You can deduct accounting fees you pay to your accountant for managing your books and preparing tax returns for your business including GST/HST returns. Similarly, any legal fees paid to the lawyers by your business will be a tax write-off to lower your income tax.
However, you cannot deduct legal and other fees you incur to buy a capital property, such as a boat or fishing material. Instead, add these fees to the cost of the property to claim CCA deductions.
4. Meals and Entertainment
As a business owner, you might be wanting to deduct 100% of all of your business meals and entertainment expenses from your taxes, but CRA limits the deductibility of most meals and entertainment costs to 50% of the amounts paid.
However, there are a few situations where you can deduct full amount of paid expenses if:
Your business is hosting an events, such as a Christmas party or similar event, and you invite the entire staff. You can claim 100% of meals and entertainment expenses for up to six such events a year.
You are traveling by plane, train or bus and the cost of meals, beverages, and entertainment is included in the travel fee.
These expenses are incurred for a fund-raising event that was mainly for the benefit of a registered charity.
Long-haul truck drivers are eligible to claim 80% of meals and entertainment expenses incurred during an eligible travel period.
5. Advertising Expenses
Advertising is crucial part of starting and maintaining a profitable business. Whether you want to advertise online, on radio, TV or in print, CRA allows you to deduct advertising expense for business advertising in Canada. Advertisements aimed for international audiences are significantly more restricted when it comes to tax deductions and may not be deductible at all. Marketing and promotional costs also count as advertising expenses. That means you can deduct:
Billboards, Brochures, Signage
Posters
Business cards
Branded materials
Marketing fees
6. Research and Development Expenses
This is another tax write-off that you should certainly keep in mind! Many small business owners are under the impression that this type of tax incentives are meant for only large corporations, however, this program is open to all types of businesses as long as they meet the project requirements. Learn more Here to find out if your business qualifies for this tax credit or Contact Us.
7. Shipping and Delivery Expenses
If your business ships or receives packages to earn business income, you can write them off as small business expense. This includes fees for delivery, freight, and express.
If you are claiming any of these tax write-offs to lower your business income and taxes p payable, you must be able to provide proof to avoid any trouble with CRA. We suggest that you maintain a good record-keeping of all business transactions. It's a good idea to keep receipts, invoices, contracts, and other documentation to support these deductions. Work With Us - we love to help organize your business finances and stay ready for tax time.
コメント