Top 3 Tax-Deductible Business Expenses: Free Guide

by | Jan 2, 2023

Tax deductions are a way to reduce your taxable income. For every dollar you earn, only a certain tax percentage applies. Moreover, tax deductions help make tax time less stressful by reducing the tax dollars you pay.

Taxes can be a significant expense for any business owner in Canada. And it’s crucial not to overlook any of these tax-deductible business expenses. This article will discuss the three most common tax-deductible business expenses you can claim in Mississauga. 

This might be the right post if you’re still unclear about what expenses are tax-deductible in Canada. If you are concerned about managing your tax information, you can get corporate tax services from Yogi & Associates.

1. What are Tax Deductions?

A tax deduction also called a tax write-off, is any legal item you can claim on your taxes that lower your taxable income. Simply put, tax deductions assist in lowering the amount of tax you must pay. In Canada, federal and provincial deductions help you to reduce your liability for tax.

2. What are Business Expenses?

All the costs you spend to operate your company act as business expenses. Thus, you can subtract these costs from your revenue. Doing this can lower the taxes you owe on the company’s income. The following are the three most common tax-deductible business expenses in Canada:

1. Business Start-up Costs.
2. Insurance Expenses.
3. Business Travel Expenses.

Start-up Costs

Any start-up costs you spend when opening a business are tax-deductible. Thus, the sum you pay to launch your business is a start-up cost. The equipment you need for your business to begin operating is also the start-up cost.

“For a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself by the handle.”–Winston Churchill.

A start-up expense must start during the tax year or fiscal year in which your business began. In this way, start-up costs can qualify for a tax deduction. Thus, any eligible start-up expenses must occur after the official launch of a business.

Note!

According to the CRA, you must have operated a business during the fiscal period the charge was made. In this way, you can deduct it as a start-up cost from your income tax.

For more information about tax-deductible business expenses, please click here to view our blog, Business Expenses That Are Tax-Deductible In Canada

Insurance Expenses

Insurance expenses are the costs you can write off for all ordinary commercial insurance premiums you pay for different things. For example, for any buildings, machinery, or equipment you use for your company. These are known as insurance expenses. However, neither your personal health nor dental insurance premiums are tax-deductible business expenses.

What are Tax-deductible Insurance Premiums?

Business insurance premiums that are tax-deductible are:

  • Property: This type of insurance protects your business property, such as your building, equipment (e.g. computers), furnishings, and supplies.
  • General Liability:  Gives insurance packages for different purposes. For instance, for injuries to customers, suppliers, employees, etc., to your property. It also protects when you or your staff are conducting business off-site. And there, you may cause an unintentional injury to a third party or their property.
  • Product Liability: This secures you if a product you manufacture or sell is defective. Or if the assembly instructions/warnings are incorrect.
  • Professional Liability:  Protects a customer’s complaint that you failed to deliver on what you mentioned in a contract. Or you mismanaged a project. In both conditions, professional liability insurance will cover legal costs and expenses.
  • Commercial Auto Insurance: This insurance protects your company’s vehicles against any damage that happens to the vehicle if driven by you or your staff for routine business.

Point to ponder! 💭

Many small businesses in Mississauga use Ordinary commercial insurance premiums. These premiums help to protect the assets from damage due to fire, theft, or other risks linked with the company. Moreover, the premiums paid for liability protection (i.e., worker’s compensation) are also ordinary commercial insurance premiums.

Business Travel

If you don’t know how to maximize your travel expenses, they can quickly add up. You should always keep track of your travel expenses as a business owner. Additionally, confirm that you are claiming legitimate costs on your tax return each year. When you travel, the cost of meals, drinks, and entertainment are only subject to a 50% tax. The following conditions must be met for your trip to count as business travel:

  • The business trip must be necessary for your business.
  • The trip must take you away from the city in which your company conducts its business.
  • The traveling time should be longer than a normal work day, making you sleep/rest on the route.

3. How Should You Keep Track of Your Books?

Having correct, up-to-date books is essential to your company’s performance.  Thus, you can manage your books and tax deductions by having a bookkeeper. In addition, working with bookkeepers improves your financial management and guarantees that your records are updated consistently from month to month.

You can also manage your books on your own. But if you are looking for a year-round, accurate bookkeeping solution that is stress-free, Yogi & Associates can support you. Our bookkeeper will help you with all your corporate taxes and bookkeeping issues. So, feel free to contact us anytime.

Final Thoughts!

In a nutshell, tracking your tax-deductible business expenses will help save you money and time. Therefore, it is important to keep track of your tax-deductible business expenses in Canada. Because the more you understand them, the less money you will have to pay in taxes.

Moreover, you can save much money with proper understanding and communication with your tax agent. For this purpose, you can take advantage of our corporate tax services for your company at Mississauga. So contact Yogi & Associates today and let us take care of your business matters.

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