Tax Tips: Four Easy Ways to Reduce Your Self-Employment and Small Business Taxes

April 22, 2010

Managing small business finances is all about money in and money out. Any time you can reduce your costs, you improve your bottom line. At tax time, finding all your allowable deductions will help you keep more money in the business.

Here are four easy ways to maximize your deductions and a get back every penny you deserve:

1. Self-employed individuals are entitled to claim deductions for expenses as long as they are reasonable and incurred to earn income. The most common include goods purchased for resale, office supplies, consulting fees, salaries and benefits, travel, insurance, equipment rental, bank charges and repairs and maintenance.  But don’t forget entertainment expenses incurred to earn income, such as meals, coffee, drinks in the bar and gifts.
    
2. If your home is your main place of employment, you may also be entitled to claim a portion of your occupancy expenses such as rent, mortgage interest, property taxes, insurance, utilities, telephone and minor repairs and maintenance. The portion you claim varies based upon the amount of space and time the space is used for business. QuickTax Business will help you with the calculations.
    
3. If you use your car for business, you may be entitled to claim a reasonable portion of gas, license and registration fees, interest, insurance, lease, maintenance and repairs, capital cost allowance and parking. The catch is to be sure you distinguish between business and personal use when claiming automobile tax deductions. If you have a vehicle that you use for both business and pleasure, you can only claim the portion of automobile expenses related to business use as a business tax deduction. To support your business claim, keep a car log documenting your daily business kilometers.
    
4. If a spouse, common-law partner or other family member is employed by a business, a reasonable salary paid may be deducted.  This may be a great tax-savings strategy for income splitting and reduction of the family’s overall tax burden.

There are lots of tips for Canadian small businesses. Find more tax tips for Canadian tax payers

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