When you run a business – and especially if your business is on the smaller side – you want to make sure that you leverage every opportunity available to reduce the amount of income tax you have to pay at the end of the year.
However, it is easy to overlook some of those opportunities. Some of them are little known, and others might be misunderstood, such that you may not realize you are eligible to take advantage and to what extent.
This blog post will highlight five of the most critical tax deductions available for small businesses in Canada so that small business owners can arm themselves with the right information in anticipation of tax season.
- Hire your spouse or child
This practice may sound questionable, but provided you are actually hiring your spouse or child, it is completely legitimate. Any employee’s wages are considered a business expense, and are therefore deductible. This is true even if the employee is your spouse or child. But this deduction offers an added benefit, as you can do some income splitting to reduce your own net income into a lower tax bracket.
- Investment tax credits
If your small business owns certain types of property or incurred investment related expenditures, those can sometimes be subtracted right off the top of the taxes you owe. These credits may be available only in specific locations, but if you do in fact qualify, it can be a sizeable break.
- Home business deduction
Most business owners are familiar with this deduction, but they may not be aware of the full range of deductions they can claim related to their home-based business. Everything from cleaning materials to maintenance, from telephone and internet to mortgage insurance, may be partially deductible.
- Legal and accounting fees
You can deduct the fees that you pay your lawyer to support the day-to-day operations of your business. As well, the fees you pay to your accountant for preparing your income tax return may be deductable.
Advertising can be an extremely costly line item in your budget. But depending on the nature of your marketing mix, many of these expenses can be deducted, at least in part. Digital advertising, for instance, is fully deductible. If you advertise with a Canadian television or radio broadcaster, this can also be written off. And print advertising, in magazines and newspapers, may be deducted in part, depending on the proportion of journalistic coverage.
There are many other business deductions of which small business owners should be aware. Working with an experienced accountant will ensure that you can take advantage of those opportunities at the right time and to the fullest extent. Contact Miller Bernstein today to learn more.