Business Tax Deductions You Need to Pay Attention To
If you aren’t claiming all your small Canadian business tax deductions, you’re flushing money down the toilet. As a manager, small business accounting may be the least of your worries—but overlooking the task can cut you short on potential savings. Here are a few of the most overlooked tax deductions you’ll want to pay special attention to.
1. Home-based Business Expenses
If you’re running a business out of your home, you escape the nightmare of real estate expenses and landlords who aren’t very cooperative. If you can prove that your home office is your principal place of business, you can deduce rent, utilities, and relevant home expenses. The proof will come in the form of strict documentation—take note of your project lists, administrative tasks, and other relevant data and information. Use your home office space to conduct business meetings and client interviews—it’ll help your tax deductions.
2. Vehicle Expenses
If you’re doubling down on your primary vehicle for personal and business use, tracking your expenses is tricky—but not impossible. Firstly, you’ll want to avoid personal tax liabilities by keeping your vehicle listed under your legal name.
The simplest way to keep track of potential deductions is to measure a per-kilometre rate against the CRA’s current allowance. Governing bodies won’t tax this income but expect that you cover other expenses that go towards maintenance, insurance, and gas. Though a viable option for business owners, it applies only to entities who are employees of their corporation.
Alternatively, you can tally your annual vehicle expenses and multiply this number by the percentage you dedicated to business use. If, for instance, you drove a total of 10,000 km in that year and committed 3,000 km to business, you can count 30% of your expenses as deductible.
3. Research and Development Fees
If your business involves developing new products and services or improving existing ones, you can cut yourself a break with R & D tax deductions. To achieve this, carefully document your process, including payroll expenses, a ledger of development costs, project lists, and project notes. The process itself is extensive but can prove high returns on tax deductions.
4. Advertising and Promo Materials
Whether you’re digital-savvy or prefer traditional means of advertising such as print and billboards, you can deduct business advertising costs on any medium. These include methods such as radio plugs, customized merchandise (such as t-shirts, mugs, or even USB sticks), or social media ads.
5. Charitable Donations
If you make regular charitable contributions to registered Canadian charities, you can count these as business expenses. Upon donation, request an official receipt that you can use to make your expense claim. Not every CRA officer will ask for proof—but it’ll always come in handy on occasion.
Running a home business isn’t as simple as getting the job done in your pyjamas—but you can reap a few financial benefits through tax deductions. With the help of local accounting services, you can rest easy knowing you won’t miss out on any business savings.
If you’re a solo-preneur, our accounting services for small businesses in Ontario at Measured Growth CPA can note your tax deductions while you focus on operations that genuinely matter. Schedule your meeting today to start saving tomorrow.