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Small business tax deductions you should be taking advantage of

As a small business owner, you can deduct any reasonable current expense incurred to earn income. The CRA provides several tax deductions for small businesses, including start-up costs, supplies, annual license fees, meals (maximum 50% of the lesser of the incurred amount or a reasonable amount), and advertising and promotions.

Do you conduct business out of your home or use a vehicle for business?

Expenses incurred for the business use of a home can also be deducted, as long as the space is the principal place of business or used regularly and on an ongoing basis to meet clients, customers, or patients. Rent costs, property tax, insurance, telephone, internet, and utility expenses are eligible for deductions. However, mortgage payments cannot be deducted. Use a reasonable basis, such as the area of the workspace divided by the total area of the home, to calculate the deductible portion.

If a vehicle is used for business purposes, car insurance, gas mileage, and repairs can be deducted.

Entertainment expenses

Entertainment expenses, such as ticket and entrance fees, gratuities, and room rentals, can also be claimed for deductions, however, the 50% limit also applies. The 50% meal and entertainment limit does not apply to office parties (up to 6 per year) and fund-raising events for registered charities, so you can deduct 100%.

Other expenses

If a commercial space is leased, the lease expense can be deducted. Accounting and legal fees for advice and record-keeping, as well as fees for preparing and filing income tax and GST/HST returns, can also be claimed. However, club membership dues, life insurance premiums, and expenses incurred to buy capital property such as laptops or office furniture are not deductible.

Claiming all expenses

It is important to claim all business-related expenses for two reasons:

  1. It reduces the tax due by subtracting the costs from the income

  2. Provides a more accurate picture of the business's financial health by recording all expenses.

It is advisable to consult a tax professional or refer to the CRA's guidelines for specific eligibility criteria and limitations.

If you know someone that has a small business, feel free to share this article to help them get the most out of their taxes!

What is a helpful small business tax deduction you learned about?

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1 Comment

Adam Wandler
Adam Wandler
Nov 13, 2023

I can't thank Tax Consultant Prince George enough for their guidance on small business tax deductions. Their team not only saved me money but also educated me on proactive strategies to manage my taxes more efficiently.

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