7 Tax Deductions for Canadian Small Business Owners

The 7 Tax Deductions Canadian Small Business Owners Can Claim

With so many different things to consider, we’ve compiled a list of the seven tax deductions you could claim as an Ontario, business owner. Make sure you find the right accountant who can help you get the deductions that are right for you.

Sadly, many small business owners are completely unaware of what expenses they can claim, how much they can claim, and how they go about doing it. To help business owners, we’ve put together this article to give you seven tax deductions for Canadian small business owners.

What Does Tax Deductible Mean?

Writing off something on your taxes is simple, it means you are deducting an amount to reduce your taxable income. You can write off a number of different items on your taxes including employment expenses, legal expenses, etc.

1. Home-Office Expenses

The most common tax write-off for small businesses in Canada is home-office expenses.

If you are working from a home office, you can claim tax deductions on a wide variety of home-office related expenses. You can claim a portion of things like your home costs, repairs, and even insurance.

Home-office expenses can include:

  • Mortgage interest on your property
  • Utility costs
  • Property taxes
  • Repairs and maintenance
  • Home insurance

Just be aware that a lot of home-office expenses are based on the percentage that your home office space takes up, compared to your overall home.

This is an important factor to consider to make sure you aren’t claiming the wrong amount.

2. Vehicle Expenses

Small business owners often use their own vehicles for their business. As a small business owner, you can deduct a number of vehicle expenses as well.

Vehicle expenses include:

  • Capital Cost Allowance if you own the vehicle
  • Gas
  • Insurance
  • Lease payments if you lease the vehicle
  • Parking fees
  • Repairs and maintenance
  • Toll charges
  • Vehicle registration fees

You’ll find that like home-office expenses, a lot of your expenses for your vehicles will work from a percentage of your annual business mileage. Which means you’ll need to compare your business mileage to your total mileage.

For example, if you drove 10,000 kilometers in the year for business, and drove a total of 40,000 kilometers for the whole year, then you may be able to write-off 25% of your vehicle expenses.

To make sure your records are accurate, the CRA requires you to maintain an accurate logbook so that they can verify the amount you are using your car for personal and business use.

3. Salaries and Wages

As a business owner, you’ll not only need to pay yourself, but you’ll usually have costs associated with your employees and their wages. Many of these expenses are tax-deductible.

Salary expenses include:

  • Payments to employees
  • Employee salaries
  • Employee wages
  • Employee bonuses and commissions

4. Contract Labor

Many small businesses start off with just the business owner and begin hiring later on, does that mean that you’ll get hit by expenses that you can’t deduct? Of course not, if you are using contract labor like freelancers or independent contractors you can deduct some of these expenses as well.

Contract labor expenses include:

  • Accountants
  • Legal fees
  • Freelancers
  • Independent Contractors

5. Advertising

The world of advertising is huge, with the whole world spending around $557 billion US dollars annually.

Most of your advertising expenses can be either partially or completely deducted, so make sure to consult your accountant to make sure you are getting the most out of your advertising deductions.

6. Meals and Entertainment

50% of the amount that you spend on meals and entertainment is tax-deductible. That isn’t your every night of the week meal mind you, it’s for the times you took a client out to dinner or to watch a basketball game.

This can mean you can go the extra mile for your clients, and get a tax break.

7. Insurance

Many types of business insurance can also be deducted.

Types of insurance expenses include:

  • General business liability insurance
  • Business property insurance
  • Business interruption insurance
  • Life insurance

You’ll find some exceptions like life insurance not being deductible unless you use your life insurance policy as collateral for a business loan, but overall it can be a good way to save on tax costs.

Conclusion

Tax write-offs are an incredible way for you to save money for your business. Feel free to contact us for a free consultation and discover how we can help you save more tax. 

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