7 Canadian Business Tax Deductions You Should Know About

Use these often-missed strategies to beat the tax man.

March comes in like a lion and goes out like…the tax man? Yep, it’s tax season again.

But, we have good news. Read on for a list of commonly overlooked tax strategies and deductions, including a few that are unique to leasing, that can help ease your tax burden. Don’t forget to talk to your accountant throughout the year to get professional advice and plan ahead.

1) Sweat the Small Stuff

Parking fees while meeting clients, buying a bag of coffee for the office, picking up “a couple” stamps – these seem like small things, but they can really add up over the course of the year. Save your receipts and maximize your income tax deductions. Note that the Canada Revenue Agency (CRA) doesn’t normally accept credit card statements as proof of expenditures – you must have the original receipts.

2) Be Generous

Donations to registered Canadian charities earn you tax credits. That’s common knowledge. But are you aware that charitable donations totaling over $200 provide you with a greater tax credit because they’re assessed at a higher rate? You can maximize your charitable income tax credits by giving more to the registered charities of your choice this year. Besides, it’s an awesome thing to do.

3) Claim Your Home Office Costs & Vehicle Expenses

If you run your business primarily out of your home, or if you have dedicated office space in your home, you can deduct a portion of your heating, electric and insurance bills. Even part of your property tax, mortgage interest, and home maintenance costs can usually be deducted. Similarly, your vehicle is a source of deductions if you use it for your job. Keep those receipts and you can claim a portion of your insurance, registration, lease payments, parking, toll charges, fuel and some maintenance charges.

4) Try Something New

The Canadian government offers tax credits to businesses that take on apprentices or research new ways of getting the job done. The Apprenticeship Job Creation Tax Credit is worth up to $2,000 per year, per apprentice, for certain trades. The Research and Development Tax Credit offers tax incentives to businesses that do research into new techniques, products or even ways to reduce environmental impact.

5) Split Your Income

Hiring your spouse or college-age child can be a great way to move into a lower tax bracket. The higher your income, the higher your marginal tax rate in Canada. Say you hire your 20 year-old daughter, paying her a salary of $10,000 yearly. Because of the basic personal income tax exemption, she would pay very little income tax and the money could help pay for her education. Or, in the case of hiring your spouse, income splitting can allow you to drop your net income into a lower tax bracket. If you choose to make use of this strategy, be aware you must complete all the paperwork as you would when hiring any other employee or contractor.

6) Claim for Staff Parties & Client Networking Expenses

Did you know you can claim a 50% tax deduction for taking that client to the Canucks game? Food, beverages, and entertainment expenses related to entertaining clients are 50% tax deductible. And that Christmas party for your staff? 100% deductible. Charity fundraisers, staff events and parties are usually 100% deductible. This calls for a toast.

7) Lease Your Equipment

Your equipment lease can help at tax season by allowing you to write off the entire cost of the monthly lease payment and by shifting what would otherwise be a capital expense to an operating expense.

For example: If you take out a bank loan for equipment, and make regular monthly payments on it, you can claim the interest paid on that loan (plus the capital cost allowance) as a tax write-off, but not the principle. If you lease the same piece of equipment, the full amount of your lease payment should be tax deductible. Meaning you can claim your entire lease payment as a business expense.

Leasing also preserves your working capital. Small Business BC recommends leasing as a great way to acquire the equipment you need while still maintaining cash flow flexibility. Especially important around tax time.

Want to know more?

Give the friendly team at Thomcat Leasing a call and learn how to get the equipment you need to work more efficiently and profitably. Give us a call today or get a free monthly payment quote. You’ll be pleasantly surprised at the convenience and affordability of an equipment lease from Thomcat Leasing.

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By Published On: March 19, 2019Categories: Business Advice