Tax Write Offs for Small Business in Canada by Accountant Toronto

What are the tax write-offs available to small business owners in Canada?

If you are a small business owner in Canada, it’s important to be aware of all possible tax writes offs for your business. Tax write offs will significantly reduce your business’ taxable income and taxes payable.

Home-Office Expenses – Tax Write offs for Small Business in Canada

The most common of the tax write offs for small business owners in Canada are home-office expenses.

Home-office expenses include:

• Mortgage interest
• Utilities
• Property taxes
• Repairs & maintenance
• Home insurance

You cannot write-off 100% of those expenses, but you can deduct a reasonable portion.

For example, if you have a home-office (such as a den, a basement, a bedroom or a confined space that you use exclusively for your work), then the percentage of your home office expenses that you can deduct is equal to the percentage that your home office space is of the total size of your home.

If your home-office space is 15% of the total square footage of your home, then you can deduct 15% of your home-office expenses. That can really add up and hopefully will result in a tax refund for you.

Before deducting home office expenses, you should consult with an Accountant in Toronto.

Car Expenses – Tax Write offs for Small Business in Canada – Accountant Toronto

Car expenses are a major tax write off for small businesses in Canada. Car expenses include:

• Capital cost allowance (if you own)
• Fuel & oil
• Insurance
• Lease payments (if you lease)
• Parking
• Repairs & maintenance
• Toll charges
• Vehicle registration fees

You cannot write off 100% of your car expenses, but you can deduct the business portion. For example, if you drove 20,000 kilometers in the year, and 50% of those kilometers were for business purposes, then you can deduct 50% of your car expenses.

In addition, if you own your vehicle then you can write off 30% of the cost of your vehicle each year, which is referred to as Capital Cost Allowance. For example, if your vehicle cost you ,000, then you could write off up to ,000 in the first year. Like other car expenses, capital cost allowance must be prorated for the business use portion of your car.

When purchasing your next car, you should consult with an Accountant in Toronto, to determine the tax benefits available to you.

Business Expenses – Tax Write offs for Small Business in Canada

Most business expenses incurred by small businesses in Canada are tax deductible.

The Canadian Income Tax Act states hat any expense incurred for the purpose of earning income from business, as long as that expense is reasonable, is tax deductible. In other words, business related expenses that you incur (as long as they’re reasonable) are tax deductible.

What are some of the common types of business expenses that a small business owner can write-off? They include:

• Advertising
• Capital cost allowance (e.g. on equipment purchases and car)
• Home office expenses
• Internet
• Inventory purchases
• Lease payments
• Meals & entertainments (50% only)
• Rent
• Salary and wages
• Sub-contractors
• Supplies
• Telephone
• Tools

Speak with an Accountant in Toronto to find out if you’re missing any tax write offs for small business in Canada.

Capital Assets – Tax Write offs for Small Business in Canada

Tax depreciation (i.e. capital cost allowance) is a big tax write-off for small business in Canada.

A capital asset is something of tangible value, which will last a long period of time (usually more than 1 year). Capital assets include furniture and fixtures, equipment, computers, etc. These assets cannot be written off in a single year. Instead, capital assets are written-off over a period of time based on the Canada Revenue Agency’s specified depreciation rates, which are as follows:

• Equipment – 30% per year
• Furniture & fixtures – 20% per year
• Software – 50% per year
• Computers – 100%

Computers include laptops, desktops, notebooks, hardware and computer related equipment, such as scanners, printers and faxes. Computers and computer related equipment can be written-off entirely in a single year, as long as the purchase was made from January 27, 2009 to February 2011. If you are looking to purchase computer equipment, now is the time to do it because you can get a significant tax deduction.

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Are you a small business owner who runs your own retail store? If you are, how is your business currently going? If it isn’t going too well or as well as you had originally hoped, you may be wondering whether you should just throw in the towel and give up. Yes, this is something that you can do, if you want, but there may be other alternatives; alternatives that could allow you to keep your small business open. One of those alternatives involves relocating your small business.

 

When it comes to relocating a small business, there are many small business owners who think that it is a good idea and others who think that it will only end up being a waste of time and money. If you aren’t yet sure what type of perspective you have, you may at least want to further examine relocating your business to another building or even another city or town, especially if your only other options is to close your business doors down.

 

As you likely already know, there a number of challenges to relocating a small business this includes the difficulty of relocating. One of those cons is the difficulty. If you run a retail store, even just a small specialty retail store, there is a good chance that you have quite a large selection of merchandise; merchandise that needs to be carefully moved, as well as other office supplies and store fittings. It can be a big hassle to move a retail store from one location to another. Although it can be considered a hassle, it is also important to mention that it can be done, with a lot of patience and hard work.

 

Another challenge to relocating a small business is the uncertainty. There are some small businesses that just aren’t right for making money. Some business owners don’t want to realize this though, so they continue to believe that they always have the chance of making money. Even if you take the time to find the perfect building for your retail store, as well as examine the local economy, and your competition, you are still not given any guarantees. Of course, that is something that you knew when you originally decided to start your small business; therefore, a lack on guarantees may not actually be a large problem for you, although it should always be kept in the back of your mind.

 

Although there are a number of challenges to relocating a small business, there are also a number of successes to be achieved doing so as well. One of it is a fresh beginning. When relocating a small business, many small business owners carefully take the time to choose which building they would like to relocate to, as well as what city or town they would like to relocate to, if looking to “really,” relocate. This carefully thought out decision can actually increase your business’s chance of seeing success. A fresh beginning, and one that is carefully examined, may be just what your small business needs to revitalize itself.

 

Before you decide whether or not you would like to relocate your small business, it is important that you speak to your current landlord or your financial lender. As for speaking with your current landlord, you may be legally bound by a commercial lease. As for speaking with your financial lender, you may need to borrow some money to relocate your small business.

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When it comes to starting your own small business in Canada, you might be at a loss at how to start. But if you have ideas and the right amount of determination, you have just as much of a chance of initiating a successful small business as your competitors. There are several ways in which you can get yourself off to a good start, as well as multiple techniques you can use to get ahead of the game when starting a small business in Canada.

The first thing you will need to do when starting a small business will to have some sort of idea to be the foundation of your plan. What do you want to market? What do you want to bring into the world? If you have already decided on the product or service that you would like to sell, you are still going to have to create a business plan. You should decide if you want to start a business as a side activity, or a hobby, or if you want to make a serious profit from it. Gather your ideas, but do not finalize anything, as even the most successful businesses change their plans along the way.

If you are not terribly wealthy, as few starters of small businesses are, you will need to seek financial help. Most banks will offer financial services and help you get a loan. However, it can be very difficult to get a loan, especially if you do not have a perfect credit history. What you need to do is assure the bank that you are prepared. This is where having a plan comes in. You have to know what you are going to do with the money, and you have to have a plan to pay it back. If you can give the loaner the confidence that you can put the money to good use and make the investment worth their time, you will be able to secure the loan. There are also all sorts of place you can go that specialize in helping small businesses, and more than just financially. These programs and services can help you have a logo designed, help you start up a web site and with advertising.

At this point, you need to start attracting customers, especially repeat customers who will come back to use your service or purchase your product regularly. Internet advertising can be very cheap and effective, if you advertise in the right place. Many services can help you find the advertising you need to kick off your small business. The Internet offers a wealth of information on small business advice and services. A good place to start is Canada Small Business Directory at www.CanadaSmallBiz.com. It is also crucial that you get referrals. Be sure to ask your customers or clients to recommend your product or service to people they know. You can encourage this by having business cards printed for you. This is a very cheap way to increase your number of customers. The more exposure you get and the better your products or services, the more of a chance that you will have that successful, growing small business that you have always been dreaming of!

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Obvious costs are usually planned for. However, hidden costs will drain your money and time without your knowledge. These costs in fact are not hidden, but get overlooked when you factor in the major expenses. If you are aware of the hidden costs, you can avoid unpleasant surprises. Besides, small business costs can be reduced to a certain extent by managing the hidden costs.

In the excitement to get the business started, many small business owners forget about the business licenses. Business licenses and permits are required to start and run a business. You have to register your company name as well. If you want to register a brand name or trademark, things get more complicated.

Licensing requirements for a small business vary according to the type of business and its location. Although minimal, costs of getting business licenses are mostly overlooked. However, ignoring the required business license and permits will cost you more in future.

Another hidden cost in a small business is taxes. While great care is taken to pay regular income tax, other applicable taxes such as self-employment tax, payroll tax, and FICA tax that includes Social Security and Medicare taxes, are often ignored. Again, these will later come up as unexpected costs and attract penalty as well.

When you raise a loan for your small business, you may not notice the hidden costs that come along with the loan. You may be so engrossed in getting the money that you won’t realize how much you are spending to get that money. If you take a closer look, you may even find the loan quite expensive. Processing fees, documentation fees, third-party fees, government fees, and other similar expenses, fall into the category of hidden fees. However, these will be clearly stated in the contract. Read the contract carefully and clarify any clause that you do not understand. Fees directly charged by the lender are often negotiable. Additionally, you should be aware of the other costs, such as pre-payment penalties and refinancing charges. Small business costs can shoot up significantly just because of these hidden charges in a bank loan.

Insurance is another component that increases small business costs. However, insurance will prevent you from shelling out cash from your pocket in case of an unfortunate event.  It is mandatory to purchase business property insurance, liability insurance, and unemployment insurance. It is advisable to buy a health insurance package for your employees.

A small business owner faces a lot of difficulties in dealing with banks, licensing authorities, and other organizations that fall in this category. Ignorance can be costly in these cases. This makes the services of a legal professional essential. This is another factor that needs to be considered as hidden cost in your business.

When you consider costs, many a time, a small business owner will not consider the cost of time spend on various activities. Spending more time on any activity increases the costs associated with it, though not tangible. Moreover, you need to consider the time you spend away from the family when you try hard to grow your business, which also has a cost attached to it.

As a small business owner, it is important to be aware of these hidden costs in your business. Apart from including these costs to your estimated capital requirements, you can also try to price your products or services after factoring in these costs.

For more information or to learn how to start your own business, contact Maryjean.

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