Running a business is expensive enough, but fortunately, there are small business tax deductions that can help reduce your tax burden. Every dollar saved in taxes is a dollar reinvested into your business.

You may already be aware of common tax deductions such as rest and office supplies. However, there are many not-so-obvious tax deductions too. In this guide, we’ll walk you through everything you need to know about tax write-offs for small businesses in Canada, helping you keep more of your hard-earned money.

What are Tax Deductions?

A tax deduction is an amount of money the Canada Revenue Agency (CRA) lets you subtract from your total income to calculate your taxable income. In some cases, qualifying for enough tax deductions can bump you into a lower tax bracket, which can reduce the amount of taxes you pay for the year.

If you run a small business, they are your best friend.

What kinds of expenses qualify as business expenses?

Any money you spend on operating your business is called a business expense and is eligible for a tax deduction on your tax return. Tax deductions fall into three categories:

Things you use exclusively in running your business.
Things you use for your business in the space where your business operates.
Things you use while operating the business.

What are the most common tax deductions for small businesses?

Numerous business expenses can be tax-deductible. The most recognised items include:

Business Supplies: The cost of supplies used by your business to provide goods and services are tax-deductible. For example, dog training services need leashes, collars, and treats.

Advertising fees: The cost of advertisements in Canadian newspapers and on Canadian radio and television stations is included in these rates. In addition to the cost of domain name registration and web hosting, digital advertising is also tax-deductible.
Delivery and shipping costs: Postage, envelopes, P.O. Box rental fees, and delivery services like FedEx and UPS are all deductible if the item being mailed or shipped is for business purposes.

Marketing Fees: Your marketing fees are the expenses invested in creating the materials that are utilised to advertise your company. Cards for business, flyers, signage, branded promotional products, trade meetings, designer fees, and printing expenses are a few examples.

Meals and entertainment: You can deduct 50% of your food and entertainment expenses. For instance, you can deduct half of the expense from your business income if you treat your client to lunch or a hockey game.

Independent Contractors: You can deduct this expense from your taxes if you hire independent contractors or freelancers for any business-related tasks, such as taking product images for your online store or creating content for your company blog.

Office Supplies: Even the price of cleaning supplies is tax-deductible for small things like stationery, pencils, pens, stamps, and paper clips. Because they are capital items, desks, chairs, filing cabinets, and calculators are not included in this category.

Motor vehicle expenses: You may be eligible to claim license and registration fees in addition to round-trip mileage and parking costs for business-related meetings and outings. Costs associated with fuel and oil, insurance, upkeep and repairs, and leasing are more examples.

Rent: You can deduct rent paid for property used in your business, including the rent for the land and building where your office is located.

Professional fees: Legal, accounting, and bookkeeping fees are all deductible small business expenses.

Utilities: Heat, electricity, insurance, upkeep, mortgage interest, and property taxes are all tax-deductible. Utility tax deductions for home offices must match the actual size of the area you use for your business.

Salaries and wages: Subtract gross salary and additional perks, such as the premiums you pay employees for Employment Insurance (EI) and the Canada Pension Plan (CPP).

Telephone and internet: Telephone, mobile phone, cable, and internet are all deductible if these expenses are used for business activities.

What are some of the lesser-known expenses your business can write off?

You may be surprised, but the following expenses are tax-deductible by law:

Bad debt: Any sum that you are unable to collect from the person who owes you money is considered bad debt. If you have previously recorded an unpaid account receivable as income for the year, you may deduct it. The expense of hiring a lawyer or using a collection agency to retrieve amounts owed to you can also be written off.

Insurance: You can deduct from your taxes any regular commercial insurance premiums you pay for any buildings, equipment, and machinery you use for your business.

Bank charges: Management and administration fees charged by your bank, including bank processing fees and the cost of ordering cheques, are tax-deductible.

Interest: An acceptable expense is interest paid on funds borrowed for business or on real estate purchased for company use. For restrictions, visit the CRA website.

Property taxes: You can deduct any property taxes you pay on the building and land where your business is located. However, property taxes associated with using your house as a workstation for business must be reported as “business-use-of-home” expenses.

Commercial or trade organisation memberships: Costs for fees, licenses, yearly dues, and business tax associated with commercial or trade organisations are tax-deductible.

What are non-tax-deductible expenses?

Some expenses may seem legit and eligible for tax deductions, but unfortunately, they’re not.

Commuting costs: While travelling to business meetings or client sites throughout the workday is deductible, travelling to and from your home is not.
Fines and penalties: Government fines and penalties, like parking tickets and speeding tickets, are not a part of tax-deductible expenses.
Clothing: You are not allowed to write off wearing a suit outside of work hours, even if you wouldn’t be caught dead in one. The same goes for dry cleaning. There are a few exceptions, such as when you wear particular safety gear or a uniform.
Life insurance premiums: Life, health, and disability insurance premiums aren’t tax-deductible for businesses or individuals.
Your labour: When deducting business expenses for repairs and maintenance, you can’t deduct the value of your own work.

How to file your taxes online and claim your deductions

If you feel that you’re leveraging the tax deductions and leaving money on the table, it is recommended to file your taxes and claim your deductions as soon as possible. It is also likely that you don’t have adequate knowledge on tax filing, or simply don’t have the time. In that case, our team at Bizincs is here to rescue the trouble. Clients receive personalized solutions for tax efficiency.

From calculations to compliance, we simply tax filing. Accurately, efficiently, and without any stress.