Knowing the top income tax deductions for small businesses can help save you to save money on the costs of running your company. At Leskun & Son Accounting, we have experience handling taxes for small businesses throughout Langley, Abbotsford, and Mission and this experience has helped us to know some of the best ways to help our clients save money during tax season.
Learn some of tax breaks available for small businesses.
Top Small Business Income Tax Deductions
When filing taxes for your small business, make sure that you keep the following tax deductions in mind to ensure that you are saving as much money as possible:
Vehicle and Travel Expenses
If you use a car or truck for business purposes or if you ever travel for work, you qualify for a deductible. Make sure you always keep records of travel expenses like gasoline, mileage, vehicle maintenance, airfare, and any other expenses. These deductions can significantly offset your tax liability, provided you diligently keep records of:
- Gasoline: The fuel costs incurred during business trips.
- Mileage: The total distance traveled for business purposes.
- Vehicle Maintenance: Costs associated with keeping your vehicle in working order.
- Airfare: Any flights you take for business meetings, conferences, or other professional activities.
- Other Travel Expenses: Including public transportation, hotel accommodations, and meals during business trips.
Supplies
Supplies essential to your business operations can reduce your taxable income. Whenever new supplies need to be purchased, make sure that the expenses are recorded and receipts are kept. Some of the supplies that are tax deductible include:
- Office Supplies: Deduct everyday items needed to run an office, such as stationery, postage, and office furniture.
- Technology Purchases: Technology expenses, including computers, software, and peripheral devices, can be written off, as long as the software is primarily used for the business.
- Specialized Equipment: Any professional tools or equipment needed for your specific trade or profession can be deducted. This might include cameras for photographers or instruments for musicians.
Property and Utilities
The space that you use for your work is deductible, whether you own it or not. Even if you use a section of your home for business, that space can be calculated as a deductible cost. Any utilities that are used for work, such as electricity, can also be deducted. Some of the deductible expenses for your work space include:
- Home Office Deduction: Calculate the percentage of your home used exclusively for business to determine deductions for mortgage interest or rent, utilities, and insurance. In order to qualify for this deduction, the space must be regularly and exclusively used for business operations.
- Rent or Lease: If you lease office space, the rent is fully deductible; however, personal use portions must be minimized.
- Utilities and Services: Utilities specific to business operations, such as electricity, heating, internet service, phone lines, and water, can be deducted. Make sure to allocate expenses proportionately if they are used for both personal and business purposes.
Learn some helpful tax tips for the self-employed.
Hired Help
If you pay anyone to work for you, the money spent on their wages, salary, or contracted work is deductible. Whether they are a permanent employee or outsourced work, payments to any person or agency are usually able to be marked as deductible on your taxes.
- Employee Wages and Salaries: Regular wages and salaries paid to employees are deductible. This includes bonuses and incentives.
- Payroll Taxes: Employer-paid federal and provincial payroll taxes are included.
- Contract Labour: Payments made to independent contractors and freelancers help reduce taxable income. Make sure to keep contracts and payment records for substantiation.
- Professional Services: Fees paid to lawyers, accountants, consultants, and other professionals are deductible. Subscription charges for outsourced services such as IT support or general administrative services also qualify.
Advertising
Any money spent on marketing your business is usually deductible. Whether you are renting space for advertising, paying an agency, or sending out printed materials, the expenses of advertising should always be submitted as deductibles.
- Advertising Space and Media: Costs associated with digital advertising (Google Ads, Facebook ads, etc.), print advertising (newspapers, magazines, etc.), and media placements (radio, TV, etc.) are deductible.
- Production Costs: Expenses related to producing marketing materials, such as graphic design, video production, and photography services, can be claimed.
- Physical Materials: Printed marketing materials such as business cards, brochures, and flyers can also be deducted if used exclusively for business promotion.
Learn all about our tax preparation services for small businesses.
By understanding these deductions and meticulously documenting your business expenses, you can significantly reduce your taxable income and optimize your small business’s financial health. To find out more income tax deductions for small businesses, or to get started with any of our financial services, please contact Leskun & Son Accounting at 1-877-826-1219 or fill out a contact form on our website.
