10 Small Businesses Tax Deductions You Can’t Overlook

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10 Small Businesses Tax Deductions You Can’t Overlook

Tax Shelter Accountants

You’re already aware of how difficult it is to get your small business rolling at the start. You’re probably struggling with all sorts of expenses. So yes, you’re aware of how complicated it is, we’re aware how complicated it is, and the government knows how complicated it is. And, considering the important roles small businesses play in the sustenance of our economy, the government offers some shelter from the storm in the form of certain tax deductions that all small businesses are entitled to.

You get these tax deductions by entering the applicable expenses in the Canadian Revenue Agencies’ Form T2125 – Statement of Business or Professional Activities. However, don’t forget securing and safekeeping the receipts and documentation relevant to the expenses that are applicable for deduction. Although a consultation with professional tax shelter accountants is far more rewarding if you intend to learn more about these deductions, here’s a wrap nevertheless:

1) Costs Associated with Media Advertising

Naturally, the only way to achieve commercial success for any type of business is through able advertising. Quality advertising will cost you some, but not as much if you’re running a small business. In Canada, the costs of advertising in local market television and local radio stations are deductible. And, the costs applicable to advertising in local market magazines and newspapers are also deductible. However, the two conditions essential to avail this deduction is that more than 80% of the material used is journalistic in nature and that the advertisement element of the content must not occupy most of the space. Only half of these media advertisements costs can be deduced if the material is not journalistic in essence.

2) Business Insurance Premiums

Not all types of business insurance qualify for a tax deduction. However, the business insurance listed below do qualify for a deduction.

General Business Liability Insurance

This tax deduction provides relief to business owners in the event of a lawsuit arising from an injury. Everybody knows legal affairs are mighty expensive. It’s important to remember that such a deduction exists to fall back on.

Business Property Insurance

Here’s a handy deduction, which you can avail in the event of damage to your business assets. You are protected of the loss arising from the damage to assets such as inventory, general equipment, machinery etc. through this deductible.

Business Interruption Insurance

This deductible is similar to business property insurance. This covers any losses, which you suffer because of any unexpected business interruption such as the onslaught of a natural calamity or an unexpected fire.

3) Business Management Expenses

Managing your business includes several recurring and non-recurring management expenses that can be deducted. Here’s the complete list of those expenses never missed by competent tax shelter accountants:

  • Costs associated with annual license fees

  • Costs related to business property taxes

  • Membership dues associated with professional organizations

  • Trading fees for commercial organizations

  • Costs associated with mails and deliveries

  • Registration of an online website domain and requisite fees associated with web hosting

  • Bank charges associated with the processing of payments

  • Costs relevant to utilizing the services of external consultancy professionals

  • Costs for seeking legal counsel

  • Costs with seeking the services of professional tax shelter accountants

Such practical deductions are all your small business needs for basic sustenance. Remember to secure the slips and receipts associated with the above-listed expenses. The Canadian Revenue Agency requires them for verification purposes.

4) Costs Associated with Traveling

Often, business commitments have business professionals travel for obligations, professional events, and opportunities. It would interest you to know that you can claim up to a maximum of expenses incurred for two events annually. The expenses that are eligible for deduction include expenses incurred while trailing with public transport, expenses associated with the accommodation in a hotel, and costs associated with meals during a business trip. However, the only prerequisite condition to the following claim is that the professional event must take place in the same area where its organizer conducts their business. In certain cases, the claim is subject to a partial deduction. Approach a tax shelter accountant for further clarity.

5) Home Business Expenses

Here’s a deductible applicable to you if you’re running your business from home. The expenses you incur here are referred to as business-use-of-home expenses. The expenses you can claim as deductible include the following:

  • Costs associated with basic utilities such as electricity, water, and the heating system

  • The interest you pay on your mortgage

  • Costs associated with maintenance such as cleaning and basic repair work

  • Other substantial costs associated with insurance and regular property taxes

Not all of the expenses that you incur are deductible. You are required to calculate the percentage of your home that is currently in use for business purposes. In certain applicable cases, you’re required to calculate the number of hours for which your residence is utilized for a business purpose. It’s helpful to ascertain this ratio with the services of a professional tax shelter accountant.

Tax Shelter Accountants in Edmonton

6) Costs Associated with Entertainment and Meals

As a principle, 50% of all expenses that you incur for necessities such as food, beverages, and other entertainment costs associated with professional deals with clients are eligible for deduction. A wide range of entertainment costs is included in this bracket. These costs include tickets or entrance fees to social, sports events. Other expenses incurred for gratuities and room rentals are also included in these deductibles.Furthermore, 100% of all expenses incurred while conducting staff events, such as staff parties or staff trips are deductible. There is a yearly limit of six staff events that is eligible for deduction.

7) Employee Salary and Benefits

You can deduct several expenses that are payable to employees on a regular basis in the form of remuneration. Additionally, you can also claim further deductions for hiring family members, provided the work they do is essential to earn professional income. An underutilized benefit of such a strategy is that it brings down your total net income, and thus, changes the tax bracket you’re currently falling under. Here are the following employee benefits you’re entitled a deduction for:

  • The costs associated with employee insurance premiums

  • The contributions made to the CPP or the Canadian Pension Plan

  • The premiums you pay for employment insurance

8) Costs Associated with Business Operations

Hefty deductions are available to small businesses when we’re considering the operating costs that are incurred by these businesses. No wonder small business owners are generally surprised at the amount of taxes tax shelter accountants manage to help them save. The operating costs that fall under this category are as follows:

  • Recurring costs, such as office rent, are eligible for sizeable deductions

  • Office essentials, such as insurance, electricity bills, and heating, are generally fully deductible

  • Other supplies that are essential to the smooth functioning of a workplace, such as stationery, computer software, stamps etc., could also be deducted under the prescribed rule set forth

9) Capital Property

Not all small business owners are aware of the capital properties that they are entitled to deduct, but a tax shelter accountant always is. Capital property includes all essential properties that are expected to bring substantial returns to your small business. This includes two major categories of assets – tangible and intangible. Tangible assets include office essentials such as vehicles, furniture and fixtures, and other basic equipments such as computers and printers. The intangible assets that fall under this category include goodwill and the concessions you make. Since capital properties are prone to depreciation, a fixed amount (a percentage of the original cost price of the asset) is eligible for deduction each year. The Canadian Revenue Agency has a comprehensive list of those assets that fall under this category.

10) Vehicle Expenses

A certain part of vehicular expenses you incur through the course of the year are also deductible. The expenses, which fall under this category include the yearly insurance your vehicle needs, the fees you pay for registration, and the lease payments you are obligated to pay. Other costs associated with vehicular maintenance include basic recurring costs such as parking charges, toll charges, and fuel charges. To calculate your deductible amount with more accuracy, seek the services of a tax shelter accountant.

All this mention of a tax shelter accountant might have made you think what is it that a tax shelter accountant does that makes them such an important ally to a small business owner? It is perhaps that they help small businesses with filing their tax returns with accuracy. Or is it the fact that tax shelter accountants guide small business owners through all the official forms and agreements, and its implications such as your rights and responsibilities relating to your tax payments. Or it could also be the fact that tax shelter accountants ease communication with the Canadian Revenue Agency. Contact us to know more about the help we provide for the benefit of small business owners.