5 Ways to Reduce Your Small Business and Self-Employment TaxesBrian Jang ON November 5, 2019
Congratulations on starting your own small business or earning self-employment income! You are certainly now discovering how important it is to manage your finances, and that means managing money in and money out. In order to improve your bottom line, you need to reduce your costs, and that is also true of your taxes.
With that in mind, here are 5 simple ways to reduce your taxes this year.
Work from Home
Having a home office can be very beneficial, as it may allow you to claim business-use-of-home expenses. To do so, however, your home office must be your primary place of business, or used only for business, serving as a meeting place for you and your customers. The claimable amount varies depending on the size of your office (as a percentage of your home) and the amount of time it is used.
Some of the claimable expenses include mortgage interest, property taxes, utilities, home phone, and minor repairs and maintenance.
Family as Employees
You may claim the salary of family members employed by your business as an expense. This may be a spouse, common-law partner, or another member of your family, and can be an excellent method for helping the higher-income earner split their income with their spouse, or another family member. Be aware that the Tax on Split Income (TOSI) requires that the family member in question does work for your business.
Keep Track of Business-Related Mileage
Many people will use their personal vehicle for business needs, and if that is the case in your business, you might be able to claim a portion of your annual expenses. Some of the costs that may be eligible include gas, registration and license fees, insurance, lease payments, and loan interest. You may also be able to claim maintenance and repairs, as well as depreciation.
If your car is also used for personal use, you will only be able to claim a portion of your expenses. To help you manage this, keep a logbook detailing the total km driven and the amount driven for business.
Private Health Service Plans
The cost of private health service plan (PHSP) payments that you make on behalf of your employees is tax-deductible. These payments are CPP and EI premium free for you, and your employees. Those employees who pay a portion of their PHSP premiums can claim this amount as a medical expense on their tax return.
All the Miscellaneous Expenses
You should be claiming every business-related expense possible in order to lower your business’s net income. You will probably think immediately of inventory, equipment, salaries, and other large expenses, but you should be sure to track even the smaller ones. This could include banking fees, cleaning supplies for your office, and business-related meals.
Track everything related to your business; enough small items can add up to a significant amount, and when tax time comes around, you will be happy for every little bit that can be deducted.
Looking for ways to reduce your small business and self-employment taxes? Contact BCJ Group today.