Running a small business in Canada comes with a lot of responsibilities especially on the financial side. Business owners have to manage all the costs right from employee salaries, rent, internet, and more.
However on the upside, the good news is that most of these costs can be claimed as tax deductions! This opportunity for businesses in Canada helps you lower your taxable income, which in turn means you need to pay less tax.
And so, to help you understand better, in this blog, we will be taking you through the 10 important tax deductions that every small business owner in Canada should know.
Table of Contents
- Why Deductions Matter
- How Orbit’s Tax Deductions Calculator Simplifies Claiming
- Bonus: SR&ED – Claiming R&D Tax Credits
- Maximizing Deductions Without Triggering Audits
- How Orbit Accountants Can Help You Calculate & File Confidently
Why Deductions Matter
Generally tax deductions lower the amount of income that is going to be taxed. In simple words it means that if your business earns $40,000 and you claim about $10,000 then you will get taxed only on $30,000.
Such savings on tax deductions can actually add up to a big amount over time. Remember that the more expenses you track and claim correctly, the more money you keep in your business!
Now that you know why tax deductions matter, we will be taking you through the top 10 essential tax deductions every Canadian small business should leverage:
1. Home Office Costs
If you are running your business right from your home then you can generally deduct a part of your rent alongside electricity and the internet, among others.
2. Vehicle and Travel Expenses
In case you use your personal or company vehicle to carry out your business’s related travels which includes but is not limited to travels for client meetings, product deliveries, etc. you can claim these costs too. And the best part? Travel expenses which include bookings for hotels and meals are also deductible.
3. Advertising, Marketing, & Promotion
One of the most interesting tax deductions include the advertising expenses. This means that you can deduct expenses for your business’s advertising and promotion, which includes but is not limited to the amounts you pay for business cards or even advertisements.
4. Professional Fees: Accounting, Legal & Consulting
The next tax deduction can be that of professional fees, those that you pay to accountants, consultants, or even lawyers. Moreover, this also includes the cost of your annual tax preparation or even that of hiring a business coach.
5. Office Supplies, Utilities & Rent
Everyday business items like pens, printer ink, paper, internet, phone bills, and rent for your office space are deductible. Even your water and electricity bills for a rented business space can be claimed.
6. Insurance Premiums
Next, if you pay for insurance which includes that of protecting your business including but not limited to liability insurance or fire coverage etc. are also deductible. Insurances keep your business safe, and hence, the government lets you write off these costs.
7. Capital Cost Allowance (Equipment, Software, Furniture)
Next, if you buy expensive items like equipment, or tech like laptops, office furniture, or software, you might not deduct the full amount right away. Instead, you have the opportunity to deduct a part of it each year. This is also known as Capital Cost Allowance (CCA) and it spreads the cost over several years.
8. Startup, Training & Membership Fees
When you start a business, there are many costs like logo design, registration fees, or business courses. These can be claimed as deductions. Also, if you pay for memberships to business groups or industry associations, those fees are deductible too.
9. Interest, Bank Charges & Loan Costs
If your business has a loan or uses a credit card for business purchases, you can deduct the complete amount of interest you pay. Plus, you can also deduct monthly bank fees and any costs related to borrowing money.
10. Digital Tools, Software & Subscriptions
A lot of small businesses in Canada today use tools like Zoom, Canva, Microsoft 365, or QuickBooks and subscriptions to these tools are 100% tax-deductible. Even paid email services or online storage counts.
How Orbit’s Tax Deductions Calculator Simplifies Claiming
Orbit Accountants offers a free tax deductions calculator on their website. This tool is specifically designed to help business owners in Canada understand which expenses they can claim. Moreover, using the calculator is also simple.
All you have to do is enter your total business revenue, then fill out categories like “Rent or Lease,” “Legal and Professional Services,” or “Home Office Expenses.” Next, the calculator will suggest how much lower your taxable income might be.
And finally you get to view the potential tax impact. Here, the calculator may show the approximate tax owing, though real results can differ based on your marginal rate and province.
This tool is perfect for those who don’t know where to start or are afraid of making mistakes.
Bonus: SR&ED – Claiming R&D Tax Credits
This program gives extra tax credits for creating new products, software, or systems. It’s more complex than other deductions but very rewarding.
Maximizing Deductions Without Triggering Audits
Remember that claiming deductions is good, however, on the other hand overdoing it can also trigger an audit. The best way to maximize deductions without triggering an audit is to always keep receipts and avoid guessing numbers. Moreover, using proper bookkeeping systems will help at its best.
How Orbit Accountants Can Help You Calculate & File Confidently
Knowing about tax deductions is helpful, but claiming them correctly takes skill. That’s where Orbit Accountants come in. As experts in the industry, they have been providing expert bookkeeping and tax compliance services in Canada. Their team of professionals have all the expertise needed to help you file your business’s taxes with the utmost confidence and have the experience needed to guide you at every step of the way! Schedule a free consultation with Orbit Accountants today!
