Business owners in Canada can maximize various tax deductions to bring down their tax liability or even get a tax refund. Often, these write-offs require a valid reason and must meet the criteria set by the Canada Revenue Agency (CRA).
To ensure that all their business expenses are accounted for, entrepreneurs need trusted accounting and bookkeeping services. A professional accountant can help determine which costs are eligible for tax benefits. Moreover, using small business accounting software can streamline the process and minimize errors associated with manual operations.
As a Canadian business owner, it is essential to familiarize oneself with the different tax benefits they qualify for. Here are some business tax deductions that entrepreneurs might overlook.
Home-Based Business Tax Deductions
Many entrepreneurs operate their businesses from home, and more have been doing so because of the COVID-19 pandemic. As such, a portion of your rent, utilities, and other home expenses might be eligible for a tax deduction.
Primarily, you must meet at least one of the two conditions stipulated by the Canada Revenue Agency (CRA):
- Your home is your primary place of business, meaning it is used more than 50% of the time solely for work purposes.
- You use the space exclusively for businesses to earn income and hold meetings, e.g., with clients, customers, or patients. Currently, video meetings are excluded according to the CRA.
Scientific Research and Experimental Development Tax Credits
Some might have the misconception that scientific research and experimental development tax benefits are for larger enterprises or incorporated companies. Nevertheless, even if your business is a sole proprietorship or a partnership, your business might still be qualified for this tax credit as long as they meet the requirements. In addition, this tax deduction is refundable.
Fuel, motor oil, lubricants, and other expenses used in your business might be eligible for tax credits. These vehicle expenses are often claimed as business-use-of-home expenses. However, it is important to note that simply driving to and from work does not instantly become deductible for self-employed individuals.
Although you can maximize tax deductions from vehicle expenses, monitoring them can be challenging. Therefore, it is advisable that entrepreneurs keep their records organized with reliable accounting software.
Wages and Payroll Taxes
Hiring employees can help you reduce your business’s income to a lower tax bracket. Whether you hire your spouse, your child, or any other family member, the cost of their employee wage counts as a business expense and can qualify for a tax write-off.
Companies that do not run a child care services business but provide a licensed child care facility to benefit their employee’s children can claim a non-refundable tax deduction. The tax credit amount is about $10,000 per child care space or 25% of the eligible costs for each child care space in the building.
Advertising and Marketing
Advertising on Canadian television and radio stations, on the internet, or in print can be written off as a small business expense, including payments regarded as a finder’s fee. When claiming these expenses, you must satisfy the criteria for Canadian content or ownership.
These requirements are not applicable when advertising on foreign websites. They are also ineligible even if a foreign broadcaster is directed primarily to Canadian consumers.
Where to Get Reliable and Easy-to-Use Bookkeeping and Accounting Services?
KIPPIN – from the phrase “Keeping it simple” – aims to make people’s lives easier by providing simple solutions to everyday tasks. We offer accounting, bookkeeping, and tax services – all on the cloud. We also align our clients to top bookkeepers and accountants on our platform.