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Last updated: May. 10, 2017
Income Tax Deductions for Small Businesses
Whether it’s a traditional brick-and-mortar operation, home-based, or online, starting a small business in Canada takes a lot of time, money, and patience.
It also gives you an appreciation for potential tax deductions you can use to either reduce the amount of income tax you pay or get an even bigger tax refund.
The Canada Revenue Agency (CRA) allows entrepreneurs to deduct startup costs as allowable business expenses.
Below is a list of some of the top income tax deductions for Canadian startups.
Startup Costs
Tax deductions for startup costs can include everything you need to get the business started. This includes:
- The first month’s rent
- Cost of signs
- Store displays
- A computer or desk
Home Office Expenses
Home office expenses are the most common small-business tax deductions. For those operating a startup from home, you can deduct certain home office expenses, including:
- Mortgage interest on your property
- Utilities
- Property taxes
- Repairs and maintenance
- Home insurance
The amount you can deduct though is determined by the size of your home office in relation to the size of your home.
Capital Cost Allowances
Capital Cost Allowance (CCA) is another major business tax deduction for Canadian startups.
CCA is the tax deduction for property that wears out and depreciates in value. In this instance, property can mean:
- Furniture
- Equipment
- Computers
- Vehicles
- Buildings
Because it is for assets that depreciate over time, the deductions cannot be claimed in a single year. Instead, the deductions are claimed over a period of time based on the CRA’s specified depreciation rates.
Office Rent
Any rent paid to a landlord for use of office space is tax deductible. While most Canadian small-business owners have their taxes filed online, it’s important to keep a copy of the lease agreement and any receipts in case Revenue Canada asks to see them or in the unfortunate event that you are audited.
Accounting & Legal Fees
Another way to reduce the amount of taxes you pay is to deduct any fees you pay to an accountant to prepare and file your income taxes. You can also deduct the amount you spend on legal fees that are related to the running of your business.
FBC, Helping Farmers and Small Business Owners Keep Records Accurate and Up to Date
Tax deductions for startups in Canada are an easy way to reduce your tax burden and save you money. While it might be easy to look at a list of deductions and think you can claim a huge part of your daily life, especially if you work from home, it’s not that simple. Every category has different conditions and if they are not followed to the letter, you could end up owing money to the CRA or even face an audit.
If you’re operating a startup, the tax experts at FBC can help you find all the tax deductions you qualify for. Since 1952, FBC has been helping small businesses and startups in Canada minimize their tax burden and maximize their assets.
Why is FBC the first choice for Canadian small-business and agribusiness owners? We understand your unique needs. FBC is the only firm in Canada to offer an integrated tax services on a year-round Membership basis. For a fixed fee, Members get access to our tax planning, tax preparation, consultation, bookkeeping, and financial planning services.
FBC provides all new Members with a review of their previous 3 years’ tax returns.
For more information on FBC and the services we offer, call us today at 1-800-265-1002 or submit an online form and an FBC tax specialist will contact you at your earliest convenience.
