If you are a self-employed individual, tax time is just around the corner. The deadline to file your income tax is midnight of June 15th. If you owe taxes though, you will have to pay it on or before April 30th.
This time of year, we get a lot of business owners wanting to know what kind of deductions they may claim to help reduce their taxes. So here it is:
As a business owner, you can deduct reasonable expenses for the purpose of earning income for your business. These deductions can help you save a lot of money.
- Home office expenses: depending on your usage of the home office space and the portion you occupy within that space to conduct business, you can prorate a portion of your home office expenses like mortgage or rent, property tax, maintenance, utilities, insurance, etc. Home office expenses are typically not in a company’s books or including in the regular accounting; and it is one that often business owners forget.
- Meals & Entertainment – 50% of your meals & entertainment expenses are deductible, however, there may be some exceptions. Refer to Canada Revenue Agency website for these exceptions.
- Capital assets: Equipment, furniture & fixture, building & land, computer hardware/software, etc are among the common capital assets. You can write off these types of costs over time in the form of depreciation.
- Other big ticket expenses are: rent, payroll, material, and professional fees. For a full listing of expenses you can deduct, please visit CRA – List of Expenses.
- Another tax saving solution: If you generate a reasonable income and is profitable, you may want to consider incorporate your business. Among other benefits of incorporating, the tax rate is significantly lower for a corporation (at 13.5%) versus personal income tax that varies from around 20% to over 40%!
Canada Revenue Agency has a lot of resources available, but it can get overwhelming and confusing. Come talk to us! As a professional bookkeeping firm, and working collaboratively with Chartered Professional Accountants, we know what to deduct and how to deduct to maximize your tax savings.