5 Tax Saving Tips for Canadian Small Business Owners

When you run a small business, every cent counts. Your budget involves more than just profits, expenses, and sales – the way you file your small business taxes can also have a big impact on your operations.

If you are a small business owner in Canada, there are numerous legal ways to minimize your tax bill. In this article, we will discuss effective strategies to lower your taxes and keep more money in your business.

1.    Stay in control of your finances

If you run a small business, staying on top of your finances can help you reduce self-employment taxes. If your financial information is disorganized, it’s easy to miss out on possible deductions, miss deadlines, and incur penalties.

It is advisable to hire an expert like Charles Ghadban Accounting to help you manage your business accounts and taxes. Accounting professionals make it easy to track your expenses, bank accounts, sales, and taxes, and they can also offer customized business and tax advice.

2.    Take advantage of tax deductions

The Canada Revenue Agency (CRA) provides a number of tax deductions that can help you to reduce your small business tax bill. You can claim the following tax deductions:

• Business management expenses: Mail and delivery costs, professional organizations’ membership dues, business taxes, annual license fees, professional consulting services, mail and delivery costs, and online marketing fees
• Capital property: Furniture, computers, vehicles, and equipment
• Operating expenses: Electricity, heating, rent, insurance, and office supplies
• Vehicle expenses: Toll charges, lease payment, insurance, fuel, and maintenance
• Media advertising costs: Canadaian market television and radio broadcasts as well as Canadian market newspapers and magazines

3.    Collect and keep receipts

To take advantage of these deductions, you need to collect and keep all receipts. The few letters you mailed, the parking fee on your way to meet a client, vehicle repair costs, and other little things can really add up over the year. Remember, the CRA does not usually accept credit card statements as proof of expenses.

4.    Take advantage of tax splitting

You can take advantage of income splitting by transferring a portion of your income to a family member with a low income.

People with higher income have higher tax rates, and splitting your income is a clever way to take advantage of marginal tax rate disparities. You can split your income by hiring a family, loaning money to them at an interest rate of 1%, or by opening a family trust and assigning your minor children as beneficiaries.

5.    Save for retirement

If you are doing well financially, you can minimize your small business taxes by making a maximum RRSP (Registered Retirement Saving Plan) contribution. Contributions to an RRSP are tax-free, up to a certain limit. While you will have to pay tax when withdrawing your money after retirement, you are likely to be in a lower tax bracket by that time.

Endnote

The amount of small business tax you pay is not written in stone. There are legal and simple strategies you can use to minimize your tax bill. However, not all of them will work for every small business, so take what applies in your case and start applying it today.

Photo by Markus Winkler on Unsplash