The full list of potential tax credits and savings is extensive. As a result, it may be wise to work with a tax professional who understands your unique needs and expenses. Get in touch with an accountant for small business/ small business tax accountant. Use the following six items as a starting point when filling out records.
1. Kilometers traveled
Spending on miles is one of the biggest items you can claim on your taxes, but tracking requires diligence throughout the year. When it comes to how and when you drive, you can track events like:
- Driving to a construction site or to work and back
- Travel for materials and new equipment
- Ways to meet potential and future clients
Your accountant for small businesses will tell you that the CRA uses a standard mileage formula to show how much you can deduct in terms of mileage. To take full advantage of this regular deduction, be sure to manually calculate your miles and travel time. You can even use mobile apps for this tracking.
2. Travel expenses
In addition to mileage tracking, construction companies often require the purchase of vehicles to conduct normal business operations. Whether you need work trucks or more specific machinery, these can be tax deductible expenses you should take advantage of. You can also cancel costs such as parking costs, fuel, and vehicle maintenance. To qualify, the vehicle should be used primarily for construction-related activities. If the use of your car, truck, or vehicle is more personal in nature, you may not be able to claim it as a business expense.
3. Tax on self-employment
Some deductions apply to you as a small business owner because you are considered self-employed. An accountant for a small business can make better discretions. One such depreciation is the tax deduction for self-employment. In a more traditional work environment, your employer would be responsible for sharing some of the expenses associated with your health and social security taxes. However, when you are self-employed, these expenses are entirely your responsibility. Fortunately, CRA rules allow you to write off the amount you pay on these taxes as part of your deductions. Your accountant for small business/ small business tax accountant would know.
4. Advertising and marketing
Not only do you need to spread the word about your company’s services, but you need to use marketing strategies that attract new customers and potential customers. While you can count on some organic results, you will often have to invest some money in the effort. Fortunately, advertising and marketing expenses are one of the savings you can apply to your construction business.
To take full advantage of this cancellation, be sure to keep track of:
- Money spent on digital channels
- Investments in print and advertising
- Costs associated with the production of marketing materials (e.g., video equipment, paper for printed materials, etc.)
Use bookkeeping services for small businesses to record all expenses.
5. Working hours of the subcontractor
Construction companies usually use paid labor to complete new projects. Many times, they are also called in subcontractors for special or highly technical aspects of the job. Provided you follow the appropriate steps, the cost of this work is generally deductible.
It should be noted that the CRA has strict rules regarding contractors as opposed to full-time construction workers. Bookkeeping services for small businesses might be able to help. To take advantage of certain labor deductions, be sure to classify each construction worker or self-employed contractor appropriately. Take the help of an accountant for small businesses to classify.
6. Depreciation costs
In construction, you will likely have to make large purchases in terms of equipment and materials. While these purchases will support your operations for many years, it is understandable that they will begin to lose value as they are used. This lost value is known as depreciation and can be included in the construction company’s deductions.
The depreciation claim can be a major boon to industries that use large equipment or properties, such as construction, agriculture, and property management. For more information on how this process works, you can review the sections on the CRA website. Use bookkeeping services for small businesses to compute the expense correctly.
Frequently Asked Questions
Can offering remote work help me save on taxes?
Despite the nature of work, you might have HR and finance working remotely. As announced on November 30, 2020, Economic Statement, the Canada Revenue Agency (CRA) will allow employees working from home due to the pandemic a simplified deduction of up to $400. The CRA will generally not require any documentation to support this deduction. Employees who spent more than $400 on home office or other expenses directly related to their job duties may be able to deduct those expenses.
can I use the refundable corporate income tax?
A Canadian-controlled private corporation that earns investment income during the year may be subject to refundable corporate income tax. This refundable tax balance is tracked through “tax on eligible dividends in cash” (ERDTOH) and “tax on dividends paid in cash” (NERDTOH).
Can meeting deadlines help me save on taxes?
Yes, as a small business owner, taxes are not due until June 15th, but all taxes due must be paid by April 30th. Failure to meet the correct deadline means that you will receive an expensive fine. The CRA will charge you a hefty 5% penalty on the amount owed when it finally shows up.
can I deduct business expenses as a self-employed person?
From applying for a business license and setting up an office to creating a professional website and promoting your new business, you may need to spend money to start earning. We have good news! You can claim reasonable expenses that you paid to earn. This will reduce the amount of income tax you have to pay and leave more money in your pocket to reinvest in your business.
Should I use Retirement Savings Plans?
Registered Retirement Savings Plans (RRSPs) are the government’s flimsy excuses for its tax cheating ways. You can also use the dice they throw at you to get the most value out of this tool
If you think you would not be able to handle this yourself, and rightly so with the amount of work, get in touch with a tax accountant in Canada. An accountant for small business/ small business tax accountant might be cost-effective and able to help.