Home » K.K. Chartered Professional Accountant’s Big List of Small Business Tax Deductions
s a Canadian small business owner, you’re constantly looking for ways to save or make money, all while dealing with the never-ending to-do list that comes with running a business on a daily basis.
Although taxes are usually the last item on your mind, they are an important aspect of any successful business operation and can save or lose you money.
While you may have be aware that you may deduct expenses such as rent and office supplies, there are numerous other lesser known tax breaks that small businesses can take advantage of, and, conversely, some things you might think you can claim a deduction for but in reality cannot. Knowing what these are can help save you money and/or avoid hassles (and penalties) with the CRA.
With this in mind, we have have put together this comprehensive guide to help ensure you never leave any of your hard-earned money on the table.
Tax deductions can be a small business owner’s new best friend at tax time
A tax deduction is money that the Canada Revenue Agency (CRA) allows you to deduct from your total taxable income. In some situations, qualifying for enough tax deductions may place you in a lower tax band, lowering the amount of taxes you pay for the year.
That is why it is critical to claim all the expenses you are entitled to, no matter how small: it all adds up! However, the emphasis here is on entitled to. Trying to claim things that you are not allowed to can lead to hassles you really don’t need.
Any money spent running your business is considered a business expense, and you can claim it on your tax return as a deduction. Tax-deductible business expenses generally fall into three categories:
The costs of starting a business might include anything from office equipment and furniture, machinery, and office supplies to legal and accounting assistance. To be qualified for a tax deduction, a start-up expenditure must occur during the tax year (or fiscal term) in which your business was established.
Materials utilized to sell your company, as well as the cost of developing these materials are usually tax deductible. Business cards, flyers, signage, branded promotional goods, trade show exhibits, designer fees, and printing charges are some examples.
When it comes to advertising, tax deductions for small businesses usually include the expense of advertisements on Canadian radio and television stations, as well as in Canadian newspapers. Digital advertising, as well as the cost of registering your website’s domain name and web hosting, are all tax deductible too.
The cost of products used by your company to provide goods or services. For instance, grooming products used by a hair salon or the dog treats provided for ‘clients’ at a doggy daycare.
Pencils, pens, stamps, paper clips, and stationery are examples of little objects you probably use around the office every day the cost of which is usually tax deductible. You may even be able to deduct the price of cleaning materials used to keep your office clean! Desks, chairs, filing cabinets, computers and even calculators are not included because they are capital items.
Rent paid for property used in your business, including the land and building where your office is located, is tax deductible.
Small business entrepreneurs frequently operate after hours and from home. If this describes you, you may be able to take a tax deduction anyway. If your house is 2,000 square meters and your office is 400 square meters, your office is 20% of the overall area of your house. This means that you can deduct 20% of your home office expenses on your tax return.
Telephone, cell phone, cable, and internet service are all deductible if used for business purposes.
Heat, electricity, insurance, maintenance, mortgage interest, and property taxes are all expenses. Deductions for home offices must be proportionate to the actual size of the area used for business.
You can, as a small business owner, deduct gross salary and other benefits paid to employees, such as Canada Pension Plan (CPP) and Employment Insurance (EI) contributions.
If you hire independent contractors or freelancers for any business-related reason, such as taking product pictures for your online store or writing entries for your company blog you can claim what you pay them as a tax deduction as well.
Usually you can deduct half of what you spend on meals and entertainment while with a client or business prospect. If you take a client out to lunch or to a hockey game, you can deduct 50% of the expense from your business revenue. In addition, when travelling for work, you can usually deduct 50% of the cost of meals, beverages, and entertainment.
If you’re sending or delivering something for business, you can deduct the cost of stamps, envelopes, P.O. Box rental costs, and delivery services such as FedEx and UPS.
Legal, accounting, and bookkeeping fees are all small business expenses that can be deducted. Yes, working with us would be a small business tax deduction if you hire us as your small business accountant!
You may be allowed to deduct license and registration expenses in addition to round-trip mileage and parking fees for business-related meetings and excursions. Other examples include the costs of fuel and oil, insurance, maintenance and repairs, and leasing.
While interest on borrowed funds to purchase a vehicle is deductible, you cannot claim the vehicle’s purchase price because this expense can only be written off over time under Capital Cost Allowance (CCA).
Remember we mentioned that some think they can claim an expense as a small business tax deduction but the CRA disagrees? Here are some common examples of those types of expenses.
Your efforts. You cannot deduct the value of your own labour when deducting business expenses for repairs and maintenance. So, if you do some DIY work around the ffice rather than hiring a professional you might save money, just not on your taxes.
While the prospect of filing small business taxes may cause its founder – you- to cry, this annual activity provides an opportunity to do what is best for your small business. The more expenses you claim, the lower your taxable income, which can result in substantial tax savings. And as our help is tax deductible, contacting us for help this tax season is a smart idea that may end up saving you money – and stress – anyway!