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Top Tax Deductions Missed by Small Business Owners

Last updated: Mar. 20, 2019 

Tax Deductions You Might Be Forgetting

The average small business owner in Canada pays more than 42% of their income in taxes. First off, that’s a lot of money. Second, no one wants to give more of their income to the Canada Revenue Agency (CRA) than they legally need to.

Unfortunately, there are a large number of tax deductions that small business owners, those who are self-employed, entrepreneurs, and independent contractors fail to make every year.

These tax deductions can get overlooked simply because it sometimes isn’t clear what’s permissible. At other times, certain deductions can only be made depending on what business you operate.

Even then, within certain businesses there are different tax deductions. Case in point, long-haul truck drivers can take advantage of tax deductions that short haul truck drivers cannot.

The truth is, there is a lot to keep track of when you run your business, and some tax deductions often get overlooked.

Most small business owners know they can deduct office maintenance and repairs, utilities, and home office expenses, but there are a lot of other tax deductions you can make.

Below you’ll find some tax tips for small business tax deductions that often get overlooked come tax time.

Business Advertising and Promotional Expenses

It doesn’t matter if it’s in traditional print or online, you can deduct your business advertising.

You can deduct the cost of advertising on Canadian TV and radio stations, and Canadian newspapers and magazines.

Business promotional material can include paint you purchased to promote your small business on the side of a truck or van.

If you’re giving a seminar or at a convention and hand out t-shirts, pens, USB sticks, mugs, or stickers (etc.) you can write it off.

Charitable Donations

You can write off any donations made through your business. Again, there are some caveats.

The charity has to be a registered Canadian charity. Most charities will issue a receipt when it receives a donation. And a donation does not need to be in the form of cash.

Money is the most common way to donate to a charity, but you can also claim things like number of miles you log on your vehicle while helping out a charity.

No matter what, make sure you keep any receipts. You do not need to submit your charitable donation receipts when you file your taxes, but the CRA could ask for proof; if you don’t have it, you can’t claim it.

Not-for-profit organizations do not count when it comes to tax deductions. 

Bad Debts

This is one tax tip that often gets overlooked.

If you are owned money but did not receive it, you can claim it. That’s because you probably already paid taxes on that income. Not all bad debt is eligible.

The CRA will not let you claim bad debts related to a mortgage or debts that result from a conditional sales agreement.

Employee Salaries and Benefits

As a small-business owner, you can deduct gross salaries you pay to employees and subcontractors. Employee benefits including Employment Insurance premiums, Canada Pension Plan contributions, and Workers Compensations.

Mortgage Interest and Property Taxes

If you’re self-employed and run your small business out of your home, you can claim mortgage interest. You can also claim your property taxes. Unfortunately, you cannot claim the full amount. You must determine the square footage that is used for the business and a percentage can be deducted. Still, it can help you to save a lot of money.

Amortization of Intangible and Tangible Assets

Every business has tangible and intangible assets. Examples of intangible assets include trademarks, patents, customer service, and goodwill (donations). Tangible assets include buildings, machinery, and inventory.

High-value items like these are capital assets that you cannot fully deduct in any one year.

As a capital asset depreciates you can claim the amount it loses annually. They are subject to what is known as the “half-year rule” though. That means a small business can only claim half of the annual depreciation in the year it was purchased.

Accounting and Legal Fees

Accounting and legal fee deductions are another overlooked tax saving tip. Any expenses you incur to take care of your accounting, bookkeeping, tax preparation, and finances can also be deducted.

FBC – Helping Self-Employed Canadians Manage Their Taxes

If you want your taxes done accurately and efficiently, ensuring you’re taking advantage of every small business deduction you’re entitled to, contact the professional tax consultants at FBC.

Since 1952, FBC has worked exclusively with small business owners, farm operators, independent contractors, and entrepreneurs. Over the last seven decades, we’ve provided tens of thousands of business owners from across Canada with tax planning strategies and advice that have helped them maximize their deductions and minimize their tax burden.

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.