If you own a small Canadian business, it is beneficial to claim these 8 tax write-offs, as they will help reduce your business’ taxable income and taxes payable.

1. Home-Office Expenses

The most common tax write-off for a small business in Canada is home-office expenses. If you work from a home office, you will be eligible for deductions on certain home-office related expenses.

2. Vehicle Expenses

As a small business owner in Canada, you can deduct vehicle expenses.

3. Accounting and Legal Fees

Deduct fees paid to your accountant for preparing your income tax return. Similarly, the amount that you spend on legal fees in the ordinary course of operating your business is tax deductible.

4. Office Rent

Rent paid to your landlord for the use of office space is tax deductible. Keep a copy of the lease agreement and rent receipts as you will be required to provide these documents, should you be audited by the CRA.

If you are a business owner or an employee who needs a car for work, you should know whether it’s more tax efficient to lease or buy a car for a business in Canada.

Buying a Car

Step 1: Calculate the cost of the car including fees and HST

Step 2: Calculate the Maximum Amount for Capital Cost Allowance

Step 3: Calculate Capital Cost Allowance Deductions

Step 4: Calculate the Tax Saving

Step 5: Calculate the After-Tax Cost of the Car

Leasing a Car

Step 1: Calculate Cost of Lease

Step 2: Determine Tax Savings from Lease

Step 3: Calculate After Tax Cost of Lease of Leasing Car

If you need to prepare your corporation income tax return check out the Step-by-Step instructions provided in this article, making the corporate tax return preparation process pain-free.

Who Has to File a Return?

If you own a Canadian corporation, you are required to prepare a corporate income tax return (T2). When you fill out your first corporate return, you must declare a year end for your corporation.

Get Organized

Getting yourself organized is the first step in preparing a corporate tax return in Canada.

Financial Statements

Before starting the preparation of your Canadian corporation income tax return, you will require the Income Statement and Balance Sheet of your company.

Where do I find corporate tax forms and schedules?

Where do you get the schedules and forms for the preparation of a corporate tax return? They can be obtained from the Canada Revenue Agency’s (CRA’s) website.

“Do I charge GST or HST on sales to another province?” If you are a nationwide business, this may be a question that you are asking. Each province has its own sales tax rate, and it can be difficult to make sense of it. Worse still, the federal government has strict regulations and you may face penalties, if you fail to charge the appropriate tax. Don’t fear! Allan Madan Chartered Accountant will show you the way.

Before we take a look at what the rules are, let’s do a little bit of background work. The Harmonized Sales Tax (HST) is the combination of Federal GST and Provincial PST into a single value added tax. Not all provinces have HST, but the ones that do are:

Ontario
Newfoundland
Nova Scotia
New Brunswick
Prince Edward Island

The provinces that charge GST and their own Provincial Sales Tax are:

Saskatchewan
Manitoba
Quebec
British Columbia
Alberta (GST only)

Do you own a Canadian private corporation and want to pay dividends to your family members? The new income splitting rules introduced by the federal government make it more difficult to do so. Keep reading to find out what you need to know about these new rules.

The Old Rules

Prior to 2018, a dividend could be paid without restrictions to family members (18 or older) of the owner of a Canadian private corporation.

The New Rules

As of 2018, dividends paid to family members of the owner of a Canadian private corporation will be taxed at the highest marginal tax rate for dividends, which could be as high as 40% in some provinces.

1. Non-Service Businesses

Businesses that derive more than 90% of their income by selling anything other than services are exempt from the new dividend rules, with specific exceptions.

2. Family Member Works in the Business

The second exception to the new income splitting rules on dividends has to do with

Suppose that you would like to buy your dream home, but your corporation holds all of your savings. If you withdraw all of your savings, you will get hit with a huge personal tax bill, which you want to avoid at all costs. So, what should you do?

Using this simple strategy, you can utilize your corporate savings to purchase your new home without paying any personal tax.

Here’s how:

Step 1:

Incorporate a Canadian company either federally or provincially; let’s call this company “House Inc.”. You and/or your family members can be shareholders of House Inc.

Step 2:

Make a tax-free loan from your existing company to House Inc. For this example, assume that your existing company is named “Money Bags Ltd”.

Step 3:

Charge an annual interest rate of 1% on this loan, which is the Canada Revenue Agency’s current prescribed rate of interest.

If you’re a small business owner that’s not incorporated and you are planning on forming a corporation soon, it’s really important that you read this article. Here, you’ll find out everything you need to know from a tax perspective. This article is broken down into five small parts.

Advantages of a Sole Proprietorship

While incorporating your business is generally much more beneficial, sole proprietorships do hold a few minor advantages.

Converting a Sole Proprietorship to a Corporation – Why?

So, why should you change to a corporation in the first place? There are three main reasons (watch full video in the link)...

Closing the Sole Proprietorship:

How do you close your sole proprietorship if you have one right now? Well, you have to do two things.

Transferring of Assets:

There are two categories of assets that are transferred.

Are you a self employed Canadian? Learn the top 8 tax saving strategies that we would recommend to reduce your taxes!

1. Home Office Expenses

If you are self employed and work from home, you can deduct a portion of your home office expenses.

2. Pay Salary to Family Members

Self employed Canadians, should pay family members a reasonable salary to save taxes.

3. Lease a Vehicle

Canadians who own their own business can save taxes by leasing a vehicle for their business.

4. Keep Accurate Books

Accurate books and records ensure that all expenses are captured on your business’ financial statements and personal tax return. This way, nothing is missed.

5. Incorporate To Save Taxes For Self Employed In Canada

By incorporating your company, your business profits will be subject to a very low tax rate of 13.5%.

A T5 slip reports dividends paid by a Canadian corporation to its shareholder(s). In order to prepare a T5 slip, you must follow these 8 easy steps below.

Step 1:

Fill in recipient’s first name, last name, and address. The recipient is the individual receiving the dividend.

Step 2:

Fill in the payer’s name and address. The payer is your corporation.

Step 3:

Write the year in which the dividend was received, e.g. 2018.

Step 4:

Determine if the dividend paid is an eligible dividend or a non-eligible dividend.

Step 5:

Enter the amount of dividends that you received in the calendar year (January 1 to December 31) in either box 24 for eligible dividends or box 10 for non-eligible dividends.

Are you an independent contractor? Learn what expenses are tax deductible and what tax savings you are eligible for during tax time.

Home Office Expenses

Deduct expenses related to your home office, such as: Utilities, Mortgage interest, Repairs, Property taxes, Insurance.

Vehicle Expenses

Independent contractors can deduct the expenses related to their car, including: Gas, Oil changes, Repairs, Toll charges, Parking, Insurance, Tax depreciation (if you own) or lease payments (if you lease).

Supplies and Tools

Supplies and tools purchased are also tax deductible.

Computer and Software

Computer purchases can be deducted at a rate of 55% per year for independent contractors. Computers include desktop computers, laptops, notebook computers, tablet PC’s, as well as computer peripherals (e.g. scanner, printer, etc.).