For individuals who own their own small businesses, it is extremely common to pay more for taxes than is necessary. At Leskun & Son Accounting, it is our goal to assist our clients in making the most out of their money, which is why we always want to ensure that they are aware of different ways to reduce small business tax bills. We offer a variety of tax services and solutions that are tailored to suit your individual needs.
Tips to Save on Taxes for Small Businesses
There are a variety of ways that you can save on taxes for your small business and keep more of your money in your pocket at the end of the year. Some tips for business owners to save on taxes include:
Contribute to an RRSP
One of the most effective ways to reduce your tax bill is by contributing to a Registered Retirement Savings Plan (RRSP). By setting aside money each year into an RRSP, you not only save for the future but also lower your taxable income, thereby reducing the amount of tax you owe. The annual contribution limit varies based on your income and tax bracket. Consult with an accountant to better understand how to optimize the benefits of your RRSP contributions in line with your financial goals.
Collect All Receipts and Invoices Related to Business
Proper recordkeeping is crucial for maximizing your tax deductions. Make it a habit to collect and retain all receipts and invoices related to business expenditures, whether they are for business lunches, travel expenses, or inventory purchases. These records will form the basis for claiming deductions and lowering your taxable income. By ensuring that every spend is accounted for, you can take full advantage of the deductions available to you.
Give to Registered Charities
Charitable donations can also contribute to reducing your tax bill. When you give to a Canadian charitable organization that is registered with the government, you earn tax credits. The more you contribute, the greater the tax credit you receive. Ensure that the charity is officially registered to qualify for these benefits and make philanthropy a win-win activity for both your community and your tax bill.
Run Your Business from Home
Operating your business from home can offer substantial tax deductions. By claiming a portion of your home expenses, such as utilities, rent, or mortgage interest, and even property taxes, you can reduce your taxable income. To qualify, ensure that the home space is used exclusively for business purposes and that you comply with all CRA guidelines regarding home office deductions.
Strategize with Your Capital Cost Allowance Claim
Capital Cost Allowance (CCA) claims allow you to write off the depreciation of capital assets like equipment and vehicles; however, these claims are elective and can be strategically managed to optimize your tax benefits. For instance, by deferring CCA on appreciating assets, you can minimize tax liabilities associated with CCA recapture upon sale. Consult an accountant to develop a tailored strategy that maximizes the long-term benefits of your CCA claims.
By employing these tax-saving strategies, you can significantly reduce your small business tax bills, allowing you to retain more revenue for reinvestment or personal savings. Additionally, a proactive approach to tax planning with the assistance of an experienced accountant can further optimize your financial strategies.
To find out more ways to reduce small business tax bills, or to get started with any of our financial services for self-employed individuals and business owners, please contact Leskun & Son Accounting at 1-877-826-1219 or fill out a contact form on our website.
