As a Canadian small business, the focus is so heavily on sales that many business owners don't take advantage of the many write offs that are available to small business owners. Writing off applicable business expenses under your business income can reduce the taxable income which reduces your taxes payable.
Pro tip - always keep your receipts #Hubdoc and your logbook #mileIQ these are necessities. These solutions are more proactive than reactive in case of a audit.
1. Vehicle expenses:
Many small business owners always inquire on leasing a car or financing a vehicle for business. Each decision carries it’s own decisioning and will require a consultation.
- Calculate your total km’s from the total km log and multiple the first 5000km by $0.55 = $2750 + each additional km add in $0.48. So if you drove a total of 10000KM for the business your total deduction would be $5150 + HST = $5819.50 (Which becomes tax free car allowance).
- Lease the vehicle which is capped at $800 a month but the total km’s you drive for personal will result in a standby charge which is included as a taxable benefit on your personal income.
2. Meals & Entertainment:
Taking your clients out for working meetings is a acceptable expense. Please remember that all entertainment related expenses are 50% tax deductible which includes expenses related to sporting events, restaurants, gratuities, entrance fees, rentals etc.
There are a total of 6 meals and entertainment expenses reserved for when all staff events/parties which is 100% deductible. So that Christmas party you are planning it’s on the house!
3. Furniture & Equipment:
If your a small business owner who just opened a business and you brought your own laptop and or other necessary equipment. You can sell your equipment/furniture to your corporation at fair market value and take back a due to shareholder note. This movement of assets into your corporation creates the ownership to be held in your corporation however you always hold possession to the furniture & equipment.
Additionally you get to take depreciation write off for year’s to come against future income.
4. Operating expenses:
Expenses attributed to create a smooth sail for your business can be written off. This includes your office rent, office supplies, accounting fees, legal fees, computer software etc. You can deduct the cost of these used directly for the business which helped to earn income.
5. Business Insurance premiums:
Often in business school they teach that the cost of doing nothing is often higher than doing something. That being said you can write off your entire business insurance expense as a eligible expense for your business. Some of the insurances that you should consider are
- General Business liability insurance - basically to protect you from potential lawsuits
- Business property insurance - in case of destruction or theft of your equipment.
- Business Interruption insurance - to cover business losses in relation to natural disasters and fire.
As always we offer free 30 mins consultations for other in depth questions you might have. Feel free to book us in for a quick call and setup.