Did you know that the average Canadian-including small business owners in Canada- pay 42.5% of their income in taxes? That’s a lot of money.
There are many expenses which small businesses can write off in order to cut down on their taxes. If you run a business in Canada one of the biggest questions on your mind is probably what different expenses can you claim to attain tax deductions and benefits?
The truth is that it really depends on business to business. However, there are some general expenses that most-if not all businesses can generally have written off.
In this comprehensive small business expenses guide, we will discuss some tax write-offs which small businesses can pursue.
1. Advertising
One expense you can claim is for your business advertisements. If you have put up any advertisements, whether they are online or through direct media outlets you can claim them. If you have advertised in a newspaper or a magazine then there are a few conditions that have to be met in order for the claim to go through with the CRA.
First and foremost you can only use Canadian media outlets to advertise. Secondly, your advertisement cannot make up the entire article, but only a small percentage (20%). The remaining 80% of the article should be journalistic in nature.
Your website’s expenses also come under advertising.
2. Promotion
Anything that you do to promote your company counts as a legitimate tax write-off. If you paint your van or truck to promote your business you can claim it as a business tax write-off.
If you run a corporation then you can claim it in your T2 form. Of course, if you chose to file your taxes with a chartered accountant you don’t have to worry about these forms and simply have to focus on listing all your promotional activities.
Any other methods of promotion such as giving seminars, giving out company tokens such as stationary and mugs, and also creating flyers all come under promotion and can be written off.
3. Donation
Any donations that you make through your business can be written off by the CRA. Once again, the charity has to be a registered Canadian charity if you want to receive this benefit.
Most large charities in Canada offer a donation receipt when you pay them. You should keep the receipts safe as they will come in handy when it is time to file your taxes. Anything from hard cash to the mileage you travel with your vehicle when helping out a charity can be claimed.
4. Meals & Entertainment
You might be surprised to know that the meals and entertainment you and your clients use through your business can also be claimed as well. So if you take a potential client out to dinner or lunch then the money spent there can be claimed.
5. Amortization of Intangible and Tangible Assets
Intangible assets such as patents, trademarks, customer service, Good Will and similar articles in Canada can be claimed as expenses. Tangible assets include machinery, buildings, and any inventory you have on hand. As the value of each article depreciates over the years you can claim the amount that is lost.
6. Bad Debts
Sometimes you get into a situation where someone owes you money but no matter what happens you haven’t been able to collect the due amount back from them. This is called bad debt.
According to the CRA, you can claim all bad debts except those which are for a mortgage or those debts resulting from a conditional sales agreement.
7. Employee Benefits
Giving your employees certain work benefits isn’t just beneficial for your employees but you can get something out of it as well. Apart from having happy employees and good work-environment reviews online, giving employee benefits also enables you to claim these expenses on your taxes as well.
8. Insurance
There are several types of business insurance and almost every type of business insurance can be claimed as an expense. It is important to have business insurance in order to protect your assets and also protect your business from lawsuits and similar complications with the law. When you are paying the insurance it may seem like an unnecessary expense (since you don’t generally need to use it every day), but in reality, you can get back from it as well.
9. Interest and Bank Charges
Any interest you have incurred and bank charges which are given when processing your payments can be written off as well. Bank charges do not include employee salaries and rental expenses, these amounts should be mentioned separately.
10. Interest on Debt
The interest you have on your debts can be written off if it fits certain criteria. If you borrowed that money in order to earn benefit for your business or to earn some sort of profit then it can be written off. If you earned any sort of dividends, royalties, interest, rent, or income. through this money, the interest for the debt can be written off.
11. Business Taxes
Everyone has to pay various business taxes at the end of the year if they wish to keep their business running smoothly and in line with the government rules and regulations. These taxes can amount to quite a lot, but the good news is that this business tax, whether it is GST/HST or income tax, can be claimed as an expense when you are submitting your tax return for the year.
12. Office Expenses
The expenses you have to go through with in order to run your office can be claimed as an expense as well. Everything from your printing expenses to your computer software can be claimed on your next tax return.
13. Professional Fees
Any fees that you have to pay in order to maintain your professional license for your practice or business can be written off. Along with professional association fees you can also claim professional services fees if you received advice professional consultations to help your business run. It is very important to note that you can not claim professional membership fees for a strictly recreational association.
14. Accounting and Legal Fees
Any expenses you use in order to take care of your accounting and finances and also those expenses you incur in order to ensure your business is on the same page as the law can be written off as well. Most small business owners are unaware that they can actually have these fees written off, but the truth is that you actually can. You simply have to claim these expenses on your next return.
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15. Management Fees
Management costs can also be claimed as an expense. What comes under management fees? Basically, anything that you have to pay in ordered to have your assets and investments managed can come under management fees.
16. Rental
The money which you use to rent out your office or your office supplies can be written off when you file your tax return.
17. Repairs and Maintenance
Repairs and maintenance can take up a large amount of money by the end of the year. Many business owners have to budget for multiple repairs and maintenance costs throughout the year in order to keep their business running safely and smoothly. Once again, there is good news because these costs can be claimed on your tax return.
18. Salaries and Wages
The salaries and wages that you give to your employees are obviously beneficial for them but you can get something out of it as well. By claiming the salary and wages of your employees you can get a significant amount of taxes reduced in that year.
19. Supplies
Similar to office supplies, anything you use to run your business can be claimed. If you manufacture a product then the supplies you use for manufacturing can be claimed. If you use specific software to give a service then you can claim that software undersupplies used to run your business.
20. Property Taxes
the property taxes you pay on your business are definitely troublesome to pay every year. however, the good news is that they can be written off if you claim them the next time you are filing a tax return. The great thing about property taxes is that you can even claim them if you run your business from home. The property tax you pay on your home will count as your business property taxes and therefore you can end up saving a significant amount of money.
21. Travel Expenses
The money you pay to run your vehicle is also another factor that can be written off. In order for your vehicle expenses to be claimable, you need to keep a record of how often and how far your vehicle was driven for business reasons as opposed to personal reasons. Everything from your parking to your fuel consumption and your car insurance can be claimed.
If you covered roughly 7500 miles for personal use and 7500 miles for business usage you would simply take out the percentage in order to determine how much you are claiming. Since your business usage was 50% of your total driving expenses, you will take 50% of however much you spent on your vehicle that year and claim that amount.
It’s not just your own vehicle expenses which you can have written off, but you can also have any travel expenses, whether through taxi, train, or plane written off if they were incurred for business reasons. However, if you own the vehicle you are traveling in you can claim 30% depreciation every year on the vehicle as well (this comes under amortization of tangible assets, as mentioned earlier.)
This small business expenses guide simply discussed the 22 most common expenses that nearly all businesses can claim when filing their next tax return. Many business owners are unaware of what they are eligible for and that is why they end up paying much more tax than they should at the end of each year.
Remember, this information is general and if you want personalized advice for your particular business it’s best to contact a chartered accountant and get in touch with them as soon as possible in order to figure out how much you can save this year.
No matter what sort of business you run, whether it is a new business which is run from home, or it is an old business that has been running in its own building for years, you can benefit greatly by claiming these expenses and having these tax write-offs filed and taken care of by the CRA.