Before any small business owner takes on the task of completing their taxes, whether you choose to utilize the tax professionals at Royer Accounting or not, it’s always a good idea to have at least some basic knowledge of how you can minimize the income tax that you will have to pay.
Here are some small business tax tips on how you can implement tax-saving strategies to save you in the New Year.
Maximize Your Claims and Contributions
Small business owners can maximize their Capital Cost Allowance (CCA) by purchasing necessary equipment and technology for their company. CCA is the means by which a small Canadian business can claim any depreciation expense for calculating taxable income under the Income Tax Act. Although, you will only be able to claim up to 50% of the allowable CCA on most classes of new assets that you have used, you will still be increasing your CCA allowance for that tax year.
Another option for some small business owners to consider is to make the most of your RRSP or TFSA contributions. If your business is set up as a sole proprietorship or partnership and is making a solid income, Registered Retirement Saving Plans (RRSPs) are a great way to reduce your taxes while saving for your retirement. You can contribute up to the lesser of 18% of your earned income in the prior year or the Canadian Revenue Agency (CRA) prescribed maximum (26,010 for 2017). Also, your RRSP contribution will be deducted directly from your taxable income.
For those in a lower tax bracket, a tax-free savings account (TFSA) might be a better option to consider than an RRSP. While TFSA contributions are not tax deductible, any earned income in a TFSA is tax-free. With a TFSA, you can contribute up to your unused contribution room, which will increase by $5,500 for 2017; however, if you turned 18 prior to 2009, and have never contributed, you can contribute up to $52,000. You can also withdraw from a TFSA at any given time, for any purpose.
If you are thinking about contributing to an RRSP or TFSA, please make sure to first consult with a tax professional, so that you can fully understand how you can maximize your claims and contributions as well as best plan for your future.
Decrease Business Expenses
Another great tax tip for small businesses is to decrease your business expenses, unless increased expenses can help increase your income. Think about any upcoming needs for products or services, and fill the orders that are vital to running your small business. The best place to start on cutbacks would be to review the categories of potential business expenses to see if your expenses are too high in any one area.
Tax Credits and Deductions
If you own a small business then you should consider claiming these eight tax write offs in order to reduce your small business’ taxable income and taxes payable; however, before you try to claim any of these tax write offs, you need to make sure that they are applicable for your particular business by either doing your own research or by consulting with a tax professional.
- Home-office expenses
- Vehicle expenses
- Accounting and legal fees
- Office rent
- Advertising
- Meals and Entertainment
- Insurance
- Capital Assets
If you are interested in learning more small business tax tips, or if you have any questions about what you can and cannot deduct, please call one of tax professionals at 604-409-4040 or fill out a contact form on our website. At Royer Accounting, we offer a variety of services (book keeping, tax services, business advisory, and accounting) that will take the stress away from you, so that you can rest easy knowing that we will get you the best return possible.
