As a self-employed or small business owner, you may be eligible to deduct a range of business expenses from your taxable income. This can help you reduce your tax bill and keep more of the money you earn. The Income Tax Act provides guidelines for what expenses are deductible, but in general, any expense that is necessary to run your business is likely to be deductible.
Some common deductible business expenses include:
· Advertising and marketing expenses: These are the costs associated with promoting and marketing your business, such as advertising in newspapers or on social media, hiring a marketing agency, or creating promotional materials.
· Delivery, freight, and express expenses: If you need to ship products or materials for your business, the costs of these services are deductible.
· Fuel costs: If you use a vehicle for business purposes, you can deduct the cost of fuel.
· Insurance: The premiums you pay for business insurance, such as liability or property insurance, are deductible.
· Interest and bank charges: If you borrow money to fund your business, the interest on the loan is deductible.
· Maintenance and repairs: The costs of maintaining and repairing your business premises, equipment, or vehicles are deductible.
· Meals and entertainment (allowable part only): If you entertain clients or business associates, you can deduct a portion of the costs of the meals and entertainment.
· Motor vehicle expenses: If you use a vehicle for business purposes, you can deduct the costs of operating and maintaining the vehicle, such as fuel, insurance, and repairs.
· Legal, accounting, and other professional fees: The fees you pay for legal, accounting, or other professional services are deductible.
· Supplies: The costs of supplies that you use in your business, such as office supplies or raw materials, are deductible.
· Salaries and wages: The wages you pay to employees are deductible.
· Telephone and utilities: The costs of phone and utilities for your business premises are deductible.
· Travel: If you need to travel for business purposes, the costs of transportation, lodging, and meals are deductible.
There are some commonly overlooked small business expenses:
· Startup cost – Costs you incurred before you opened your doors for business
· Bad debts
· Home office deduction- you use part of your home exclusively for conducting business
· Private health service plan premiums
· Business tax, fees, licenses and dues
· Parking fee for business trip
Keep in mind that if your expenses for a calendar year exceed your income, you will have a business loss. This loss can offset any other income that you earned in the year. You can carry forward business loss to future years if the loss can’t be used up in the current year. Be sure to carefully review all of your expenses before filing your tax return.
If you need help from a professional accountant to minimize your tax bill, please contact us at info@aylcpa.ca.