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and more people have their own businesses these days. Everyone has
heard that self-employed or those people that run their own business
pay less in tax. But how do they do it? Here are 10 ways that you
can reduce your taxable income and save taxes.
1. Home office expenses. If 10%
of your home is used for business you can deduct 10% of your home
expenses. This includes rent or mortgage interest, property tax,
utilities and insurance. Don’t forget gardening costs and
home maintenance.
2. Vehicle expenses. Keep a log
of business trips and deduct a portion of your car expenses. Include
all trips including trips to buy office supplies. Eligible expenses
include interest on loans, fuel, repairs and maintenance. Don’t
forget depreciation using the government’s Capital Cost Allowance.
3. Depreciate assets used in the business.
Many people don’t know that if you contribute furniture or
computers to your business (even if the business didn’t buy
them) you can write off part of the expense.
4. Hire a spouse or child. Income
splitting (and tax savings) can be achieved by hiring a family member
to do some work for you. For example, your child could be hired
to do filing. They would likely pay no tax while you get the deduction.
5. Consider incorporating. If
you leave money in your business it may be beneficial to incorporate.
Corporations pay less tax than individuals. The opportunity also
exists to defer tax by declaring year end bonuses.
6. Private Health Insurance. Many
business people are now able to deduct the cost of health insurance.
The rules are complicated so consult a professional tax advisor.
7. Register for GST. Some small
businesses think they shouldn’t register because they don
not have to. But they should. If your expenses exceeded income you
could get a GST refund. By using the “Quick Method”
you may be able to increase revenue 2-3% by special rules that require
only 4 or 5% of collected GST to be remitted.
8. Interest Costs. Many people
invest in their company. By properly structuring your debt you can
make any interest on money borrowed for business purposes deductible.
9. Business Travel and Conventions.
There are limits but if a convention that relates to your business
is being held consider staying a few days longer as vacation. By
combining activities the business can deduct high transportation
costs and you get a few days rest and relaxation.
10. Work with a Professional.
The tax rules are complex and change every year. Working with a
professional can ensure that you get all the deductions you deserve.
By careful planning, record keeping and professional assistance
you can reduce your taxes and maximize your income.
www.williamsfm.ca
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