Maximizing Business Income Tax Deductions
If you’re like most Entrepreneurs and Small Business, December 31st was your fiscal year end, and you’re already sorting through your receipts, and making preliminary income tax calculations for the year. But are you maximizing your small business tax deductions?
1. Making expenses deductible
The first rule for maximizing, your business income tax deduction is to have all your business-related receipts. CRA (Canada Revenue Agency) requires that all business expense needs to be backed up with receipts and be kept for a period of six years.
If you have not yet got in the habit of ensuring your expenses are deductible, it should be first on your business resolution list for the New Year. To maximize your business income tax deductions you need to train yourself to ask for a receipt for every business expense no matter how small. Make sure that the receipts show what they are for, vendor name and date. With this information it is then also easier to record the expense in your record or accounting system.
2. The cost of doing business
The second thing that the small business owner should do is ensure that all cost of doing business has been deducted. Following are a few expenses that are commonly overlooked by the small business owner.
Maintenance and repair cost relevant to the business
You can deduct the full cost of maintenance and repair on any property used to earn income. If you did the repair yourself the labour will not be deductible.
Professional fees
Accountant, Bookkeeper and Lawyer fees are legitimate expenses and are deductible for tax purposes.
Insurance business expenses
Life insurance premiums are not deductible but insurance on buildings, machinery or equipment used in the business is.
Interest and related fees
Its no secret that interest when borrowed for business or investment purposes are deductible. You’d be surprised, however, at how many tax preparers miss out on claiming this deductions. Don’t be one of them.
Business taxes, business related dues, membership and subscription
The majority of people know that business taxes and business licensing fees are deductible. However many people over look the membership fees they pay to business related organizations. If you are like me you belong to many i.e. your local networking organizations. Don’t forget to claim them!
Business use of residence deductions
There are limits to which a self-employed individual can deduct the cost related to workspace in the home. They are confined to situations where the space is used exclusively and on a regular and continuous basis for meeting clients, customers or patients, or is the individual’s principal place of business. With that said, there are a number of deductions that home business owners that meet these requirements should be aware of.
Keep in mind the above list is just a sample of the possible expenses that can be incurred by a small business. For specific deductions relating to a particular business or industry, contact us, we can help you identify them.