Like most small business owners, you are probably thinking about your tax return for this year and wondering how you can maximize your tax deductions. The most important thing is to have all your business-related receipts, as all your expenses must be backed up with receipts. You also need to keep receipts for six years in case the CRA ever asks for them.
Remember to ask for a receipt for any business-related transaction throughout the year and make sure that they are legible with the vendor’s name, the date and what the receipt is for. This information will help you when inputting the receipt into your record keeping system and this should be done as soon as possible so that the purchase is fresh in your mind.
In addition to your purchase receipts here are some more business expenses that you must make sure not to overlook.
- Annual membership dues for business-related organizations
- Interest you have paid on money borrowed for your business, you can also deduct related fees such as one that you might have paid to reduce the interest on your business loan.
- Insurance premiums that you might have paid on the building or equipment you use in your business
- All relative maintenance and repair expenses for your business
- Office business expenses and supplies
- Home business expenses such as a portion of your utilities, home maintenance and property repairs, a cleaning service or cleaning materials, house insurance. You can also deduct a portion of your property taxes and your mortgage interest.
- Capital cost allowance – this is an expense for depreciation on business property such as furniture, computers.
- Automobile expenses – the cost of fuel, the license and registration fees, insurance, maintenance and repairs, and the interest on your car loan can all be claimed as business expenses. However, you need to distinguish between business use and pleasure use because you can only claim for the business use of your vehicle. To help you with this it is important to keep a mileage log.
- Travel - if your travel was related to earning business income then you can deduct part of the cost of meals, entertainment and the cost of transportation and accommodation. You can deduct the cost of attending two conventions per year as long as they are directly related to your business.
- Employing a spouse or child in your business – this would make them an employee and you can deduct their salary as a business expense just as any other employee and you will need to issue them a T4.
- Advertising – you can only claim for advertising in a Canadian newspaper or on a Canadian tv station or radio station, and only in an E-zine or website that originates in Canada.
- Accounting and legal fees are all tax deductible, and this includes getting professional advice about maintaining your books and records.
For more information on tax deductible expenses visit https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/business-expenses.html