Best Tax Reduction Practices For Businesses
It can often feel like your business is paying a lot of money in taxes, that’s why it’s your responsibility to learn what you can do to reduce them when possible. As a business owner, you want to do what you can to help your business thrive, even during tax season. So, here are some of the best tax reduction practices you can learn for your business.
Collect All of Your Receipts
It may seem monotonous, but keeping and organising all your receipts will really help you reduce your taxes at the end of the year. From the parking fee you paid to visit a client to the fresh package of pens you bought on a whim -- they’re all deductibles.
At the time, that $5 parking fee might seem so small that you feel keeping the receipt isn’t worth it, but it adds up! Imagine you paid $5 in parking to visit clients twice a week. That adds up to $480 per year! And that’s just parking. Imagine all the other little deductibles you can add up if you keep track of your receipts.
“Remember that the Canada Revenue Agency (CRA) does not normally accept credit card statements as proof of expenditures. You must keep your original receipts in case they are requested by the CRA.” - Small Business
Donate to Charity
Another way to reduce your taxes is to donate to charity. Charitable donations are deductible!
“The third path on this list of ways to reduce business taxes in Canada by following the law is through donations. Corporations that make donations to registered charities can write-off the entire amount of the donation as an expense as long as the corporation is profitable.” - Madan
Do you ever go to the grocery store and notice how the cashier often asks you if you’d like to donate $2 to a certain charity? This is their way of collecting money to donate for charity and write off their taxes without having to donate any of their actual profits.
Contribute to Your Retirement Plan
Guess what payments to your retirement plan are? Deductible!
People who are self-employed or who are small business owners have many options for their retirement savings plan, including access to traditional RRSP like most other Canadians. This can also be combined with other retirement plans, allowing you to contribute a lot to your retirement plan every year. The more you contribute, the more you can deduct!
“Talk to your financial planner and CPA to help narrow down which plan will allow your business to contribute the most. These moves pay off now with tax breaks, and payoff later by helping you create a secure retirement.” - Forbes
There are many things small businesses can do to reduce their taxes and a lot of this has to do with deductibles. If you want to learn more about what small businesses can deduct, especially when it comes from working from home, check out this blog!
Taking the time to learn about deductibles and tax reduction practices is going to be very beneficial to your business. Some things may seem small, like parking fees and pens, but they always add up, so keep track of it all!
Do you know any tricks for reducing your business’s taxes? Let us know in the comments below!
If you need some more help figuring this all out or need any other bookkeeping/accounting help, book a discovery call.