Paying tax is inevitable. However, you do have some control over how much tax you pay. Be lax about your record keeping and tax strategy: pay lots, be disciplined and careful: pay less, sometimes much less. Knowing what deductions are allowed and maintaining your records are the basics of an effective tax strategy. A good bookkeeper and accountant can also help.
To save money on your taxes:
- Keep all receipts and invoices.
- Develop a good record keeping system.
All Reasonable Business Expenses are Tax Deductible
A business expense is a cost you incur for the sole purpose of earning business income. You support all your business expense claims with evidence. You are required to keep evidence for 6 years. Ensure that you write the details of expenses in your records.
Reasonable business expenses include:
- Life insurance that secures a loan.
- Interest on business loans.
- Local and international travel business expenses.
- Bad debts. Provision can be made for bad debts.
- Home office expenses. You can deduct a portion of your rent or mortgage, hydro bill, gas etc.
- Advertising expenses.
- Business licenses/insurance
- Delivery and freight costs.
- Maintenance & repairs of business equipment.
- Office expenses.
- Meals & entertainment – 50% of the total spent.
- Conventions – You are allowed to deduct 2 per year. Only 50% of meals and entertainment at these events is deductible.
- Health and dental insurance
Consult your accountant regularly on what expenses are deductible.
Expenses that are not allowed
- Personal and domestic expenses.
- Inventory taken for personal use.
- Traffic fines and related professional fees paid to defend these in court.
- All Federal and Provincial penalties and interest charged.
Take the time to carefully account for all of your business expenses. At the end of the year review your expenses to find any you may have missed. While tedious, this can be the difference between your business paying tax or not.
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{ 5 comments… read them below or add one }
Fantastic basic info on taxes, thank you. I wish I read this years ago, but it will help tons of budding entrepreneurs. Keeping organised is the key. This year was the least painless in preparing everything before taking it to the accountant. I have folders with magic markered titles on them. Whenever I take a receipt out of my pocket, it goes into one of these folders. Any receipts need need clarifying, I'll write a note on it or attach it to a page with a note. I keep a spreadsheet of income and a separate one for business expenses.
Great post. Lots of helpful info, especially at this time of year.
Meals and entertainment add up. I'm always surprised on this one.
Great tips especially to those who finds no time in scrutinizing all records and mostly not up to date in recording thus ending-up cramming.
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