5 Best Business Tax Tips for the Year End

Allan Madan, CA
 Jan 3, 2017
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Take advantage of these 5 tax tips before the end of the year and save taxes for your business.

1. Purchase business assets before the year-end

Your corporation can claim 6 months of tax depreciation (also known as capital cost allowance) on assets purchased during the year. Take advantage of this tax deduction by purchasing business assets before the end of the year.

For example, assume that your company purchases computer equipment for $10,000 on December 31. The CCA rate on computer equipment is 55% per year. Even though your company will only own the computer equipment for a single day, it can still claim 6 months of depreciation, which amounts to a deduction of $2,750.

2. Declare a bonus for yourself and family members

Your company can deduct from its income a bonus payable to you and other family members that work for the company. Even though the bonus will not be paid as of December 31, it’s still a corporate tax deduction, dollar for dollar! Note: The bonus must be paid within 6 months of the company’s year-end according to the CRA’s rules.

Let’s look at an example. ABC Company has a taxable profit of $100,000 and is facing a corporate income tax bill of $15,000. Its year end is December 31. After consulting with their accountant, ABC Company recorded bonuses payable of $100,000 to the primary owner and his family members as follows:

 
 
Bonus Payable to Family
Taxable profit (before bonus) $100,000
Bonus to owner $34,000
Bonus to spouse $33,000
Bonus to adult child $33,000
Taxable profit (after bonus) $0

As you can see, the taxable profit is now $0 and no corporate income tax is owing.

3. Spend, spend, spend!

Don’t wait until the new year to make business purchases. Instead, make them now or on December 31. This way, your company can claim a tax deduction for its current tax year for the business purchases made.

4. Don’t forget to claim mileage

An employer can pay a tax-free vehicle allowance to its employees at a rate of 54 cents for the first 5,000 kilometers and 48 cents for each additional kilometer. This vehicle allowance is tax deductible for the employer.

So if you are an owner-manager of your business, make sure that you take advantage of this tax deduction before the end of the year.

5. Have a company holiday party

Money spent on company holiday and Christmas parties are fully tax deductible. So consider rewarding your employees with a fun party this year and claim a tax deduction at the same time!

So here’s the tip: Implement these 5 Best Tax Tips by December 31 and save taxes now!

Disclaimer

The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.

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