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Small Business Tax Deductions You May Be Missing Out On

Every year, a considerable number of tax deductions are overlooked by small business owners, self-employed individuals, entrepreneurs, and independent contractors.

In Canada, the average small business owner pays more than 42% of their revenue in taxes. To begin with, that’s a substantial sum of money. Second, no one wants to pay the Canada Revenue Agency (CRA) more money than is required by law. In other words, what they have to.

Still, every year, a considerable number of tax deductions are overlooked by small business owners, self-employed individuals, entrepreneurs, and independent contractors.

Because it’s not always clear what’s acceptable, these tax deductions can even be things small business owners do know about, but as certain tax deductions are limited to the type of business you operate they are just not sure if they would apply to theirs, so they err on the side of caution and don’t claim them.

So while most small business owners are aware that they can deduct basic office upkeep and repairs, utilities, and home office expenses, there are many more.

Below are some ideas for small business tax deductions that are sometimes missed during tax season.

Advertising & Promotional Expenses

You can deduct your business advertising whether it’s in traditional physical advertising, like billboards and flyers, or online promotions like PPC advertising or social media marketing.

Advertising costs on Canadian TV and radio stations, as well as Canadian newspapers and periodicals, can be deducted as well, although often not if you are running ads outside the country, although an accountant could tell you for sure.

Things you might not realize qualify as promotional may be tax deductions, too. Paint you bought to promote your small business on the side of a vehicle or van can be classified as business promotional material and claimed back on your business taxes, as can things like
giving a seminar or attending a convention and giving away t-shirts, pens, USB sticks, mugs, or stickers (among other things).

Donations to Charity

Usually, you would expect to be able to deduct any contributions your business has made to charity. And typically you can, with several caveats you should be aware of.

The charity must be a registered charity in Canada. When a donation is made, most charities will provide a receipt, and that will tell you if they are, as should their website. However, a tax deduction eligible charitable donation does not have to be in the form of money.

The most common way to donate to a charity is with money, but you can also claim things like the number of kilometers you drive a company vehicle while assisting a charity. So if you have been helping to deliver needed goods to beneficiaries, you should be able to claim that mileage.

Whatever the case may be, save all your receipts. You don’t have to submit your charitable donation receipts with your taxes, but the CRA may request verification; if you don’t have it, you won’t be able to claim the deduction legally.

Defaulted Debts

This is an important small business tax deduction tip that is frequently overlooked.

You have the right to claim money that you were owed but did not get. This is due to the fact that you have most likely already paid taxes on that money. Not all types of bad debt are eligible, however. You won’t, for example, be able to claim bad debts connected to a mortgage or debts incurred as a result of a conditional sale agreement with the CRA.

Salary and Benefits for Employees

You can deduct gross salary paid to employees and subcontractors as a small business owner and also any benefits. Employee benefits include premiums for Employment Insurance, contributions to the Canada Pension Plan, and Workers Compensation, and, in some cases perks as well (gym memberships etc.) but again, you should consult with a tax professional to find out for sure.

Interest on a Mortgage Plus Property Taxes

You can claim mortgage interest if you’re self-employed and run your small business out of your home. You can also deduct your real estate taxes. Unfortunately, you will not be able to claim the entire amount.

You must calculate the amount of square footage used for the business and deduct a percentage. Nonetheless, it has the potential to save you a significant amount of money when done right.

Intangible and Tangible Assets Amortization

There are tangible and intangible assets in every firm. Trademarks, patents, customer service, and donations are examples of intangible assets. Buildings, machinery, and product inventories are examples of tangible assets.

These are high-value capital assets that you can’t fully deduct in a single year.

You can claim the amount that a capital asset loses each year as it depreciates. They are, however, subject to the so-called “half-year rule.” As a result, a small business can only deduct half of its annual depreciation in the year it was purchased.

Fees for Accounting and Legal Services

Another way to save money on taxes is to deduct accounting and legal fees. You can deduct any costs associated with accounting, bookkeeping, tax preparation, and financial management. So yes, you can deduct anything you pay us to prepare your taxes, so we can ensure that you haven’t missed any small business deductions you can claim!

Want to ensure that your small business taxes are completed efficiently, in accordance with all the CRA’s rules and regulations, and potentially pay less in taxes on your small business, so you can invest that cash in creating a bigger business? We can help. Contact us today and let’s get started.