You may be paying too much in taxes and not realize it. Small businesses sometimes fail to take advantage of the tax deductions available to them, costing their businesses hundreds if not thousands of dollars in tax payments. You can reduce your small business taxes by following several proven steps.
One way that small businesses miss out on tax deductions is by not formally setting up the business legally. By incorporating your business, you begin to formally separate your business and personal management to enjoy the tax deductions due you. Contact your province’s corporate registry for filing information and work with the CRA to secure your business number. Many provinces this is done automatically once you incorporate.
When you formally established your business, you were given a business number by the CRA. That nine-digit number should be used by you as you open up checking accounts, seek credit and for obtaining your business credit scores. Keeping your personal records separate from your business is important if you are a corporationas your business dealings will not be attached to your personal dealings.
As an individual you enjoy certain tax deductions. Such as RRSPs, charitable donations and certain family credits. As a business, there are deductions available to you including what you pay for rent, equipment amortization and the payment of provincial sales taxes. You can also enjoy tax deductions for cost of goods sold, capital expenses, the business use of your car, insurance, interest, taxes and rent.
There are several ways that you can take advantage of income tax depreciation deductions for your business, especially with the property your business owns. Although land is not depreciated, your building is. Moreover, improvement to same can be deducted. You can turn land into a deductible asset by leasing the property separately instead of buying it. Try accelerating your depreciation deductions by separating your real property from personal property.
Clearly, you have an advertising budget in mind. Did you know that your advertising expenses are deductible? That is one reason why businesses large and small advertise heavily: your advertising expenses are directly deductible from your taxable income.
Employee costs are tax deductible. While you may think that you cannot afford to pay your key employees more, you may find that you really have no choice. Especially if you want to retain your best workers. The greater expense in increased compensation is tax deductible and can be more than countered by the increased work your most loyal workers will provide.
Work with your accountant/bookkeeper to find additional tax deductions available to your small business. Find one that’s worked with your industry before, as then they may know certain deductions only related to that industry. Provincial and local incentives vary and may provide additional relief to your small business.
Stay Alert and Recognize Signs that your Business may be in Trouble
Working from home? Canadians may get a $400 Tax Deduction
Personal Finance Resolutions for 2021
Need Money? Should you Withdraw from your RRSP?
Financial Literacy Lessons Should Begin Early in Life
Over-contributed to your TFSA or RRSP? Here’s what you should do.
Financial Considerations for First Time Home Buyers
Will Covid-19 Relief Measures Affect my Taxes?