Tax Deduction Tips for Canadian Small Businesses

With tax season approaching, now’s the time to make sure you have everything you need to properly file your taxes and get the most out of your return. Read our article for some helpful tips.

As a small business owner in Canada, it’s important to be aware of the different small business deductions that you’re eligible for come tax season. There are many small business tax deductions in Canada that can help reduce your taxable income, saving you money on your taxes. In this blog post, we’ll discuss some of the most common tax deductions that small business owners can take advantage of.

Related Read: When Are Taxes Due for My Business?

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The Amount of Tax Deductions You Can Claim Depends on the Size of Your Business

If you own your own business, one of the advantages is that you can claim tax deductions from the money you’ve earned. Every business is different and depending on the size of your enterprise, the amount that can be deducted may vary. It’s important to keep an eye out for all of the potential deductions available and to understand what restrictions might apply. Even small expenses like office supplies or travel costs for client meetings can be deductible. To maximize the number of deductions your business is eligible for, make sure to do the appropriate research to make sure none are missed.

Deduct Expenses Such as Office Supplies, Travel, and Entertainment

Whether it’s your own home office or a shared workspace, taking advantage of small business deductions (SBD) can make running a business much more cost-effective. Expenses associated with the setting up, running and maintaining an office can be written off on taxes when they’re itemized — so don’t forget to look out for things like office supplies, travel costs and entertaining clients. Be sure to keep all your receipts of taxable expenses incurred if you want to make the most back on your tax return.

If You Have Employees, Deduct Their Salaries and Benefits

Small businesses with employees can reap the benefits of deductions on their salaries and employee benefits. Setting aside money for your employee costs is an important part of budgeting in any business, and hiring an accountant or tax professional can help make sure everything is being properly accounted for.

Deduct Interest on Business Loans and Property Taxes

Both loan interest and property taxes can be deducted from your business’s income, helping to reduce your overall taxable income since you’re essentially deducting those two expenses from your profits. Just make sure to keep any receipts or documents related to these transactions so that the deduction will be acceptable come tax filing time.

Keep Track of All Your Receipts and Documentation in Case You’re Audited by the CRA

Keeping track of all receipts and other documentation related to your financial records should be one of your top priorities. Not only is it essential for filing taxes accurately, but also for protecting you in case of an audit by the CRA (Canada Revenue Agency). While audits are fairly unlikely, having all your materials ready beforehand can save you the worry and hassle of dealing with the fear of being audited down the line. Being prepared with a well-organized folder that contains all the necessary paperwork is a good way to have peace of mind, with the knowledge that everything is on hand in case you ever do receive a letter from the CRA asking for more information about your corporate income tax year.

Claiming Too Many Deductions Could Result in an Audit, so Be Sure to Consult With a Tax Professional First

Whether you’re filing taxes on your own or using a professional service, you’ll want to make sure that you don’t overdo it with the deductions. While claiming them can be tempting as a way of lowering your tax obligation, getting carried away could result in an audit by the IRS. Your best bet is to consult with a tax professional first — they can help you decide what is and isn’t allowable.

Know the Rules and Regulations Around Claiming Tax Deductions

When it comes to claiming tax deductions, Canadian small business owners must familiarize themselves with the rules and regulations set out by the Canada Revenue Agency. It’s important to remember that only legitimate business expenses are deductible — any personal or family expenses related to your business are not. Additionally, businesses should retain records of all transactions and invoices of their purchases as evidence that they paid for all deductions on their return. Furthermore, entrepreneurs should consider taking advantage of specific tax measures like the Work-Space-in-the Home Tax Deduction which allows certain home business owners to deduct a portion of rent or utilities.

We can’t file your taxes for you, but we can help protect your small business with insurance coverage that’s designed specifically to your profession. Get a free quote today and have your policy documents emailed directly to your inbox.

Need Insurance for Your Small Business?

APOLLO and Gallagher have partnered to provide insurance designed for businesses and business professionals. Get a free quote online in under five minutes and receive your policy instantly.

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