It’s everyone’s favourite time of year – tax season! While sorting out your taxes might not feel like the most glamourous job, there are some clever (and legal) ways you can reduce your income tax bill. If you’ve got your receipts in hand but don’t know where to start, you’ve come to the right place. We can help you navigate the complexities of filing your taxes so you can save the most money and continue growing your profits.
A tax deduction is any expense that you can deduct, or “write-off”, from your taxable income. These deductibles will lower the amount you owe back to the government and generally, businesses of all sizes can deduct any expenses incurred that are directly related to making the business operational, in addition to any necessary expenses that maintain the business once it is established. When it comes to taxes, there is very little margin for error, so in order to ensure you can claim your expenses and help the process run smoothly, consider working with a professional bookkeeper and always remember to hold onto those original receipts.
Tax Deductions for Small Business Owners
As a small business owner, it can be challenging to know what deductibles are applicable to you. We often see that many people find it difficult to stay on top of their deductibles throughout the year, only to run into problems when they try to piece everything together at the last minute. Fortunately, we’ve compiled a list to help you distinguish the business expenses that are relevant to you, so you can file your taxes on time and with greater ease:
- Operating Expenses: If you’ve started a new business venture in the latest tax year, you can deduct a certain amount of your start-up expenses which may include marketing materials, travel and training costs.
- Office Expenses: If you use a home office to operate your business, you may be eligible to deduct a portion of your housing expenses against your business income. In order to qualify, you must regularly use your home office space exclusively for business and it must be the main place where you conduct business activities. Additionally, if you rent an office space or equipment, these can also be included as a business expense.
- Advertising and Promotions: Advertising is an essential component for any business and this expense can be claimed, however all your advertising must be directed towards the Canadian market. Advertising material expenses such as ads for radio, newspapers and television can be fully deducted but magazine advertising usually depends on the publication content.
- Business Insurance: You may be able to deduct some of the premiums you pay for business insurance which can include: property coverage, liability coverage, auto insurance, life insurance and more.
- Salaries and Benefits: If you have employees, their salaries, benefits and even vacation time are often tax deductible as long as the employee actually provided services, they are not a partner and their salary is reasonable and necessary.
- Business Meals: You may be able to deduct food and beverage expenses, but they cannot be lavish or extravagant, must be ordinary and necessary, and finally, the business owner or other employee must also be present at the meal.
- Work-Related Travel Expenses: A business trip qualifies as tax deductible as long as it fulfils certain criteria. The trip must take place away from the city or area you normally conduct business from and must be longer than a normal day at work. Approved business travel expenses can include travel via bus, car, train, or plane, using your vehicle while at your travel location, parking and toll fees, business calls, and more.
Bookkeeping by Jan & Co. – Virtual Bookkeeping Services for Your Small Business
For a free assessment, or to receive an accurate quote for our virtual bookkeeping and accounting services, please give us a call at (403) 358-2860 or complete our online form to schedule a chat.