Income Tax Tips for Small Business Owners and Self-Employed Individuals

Small Business and Self-Employed Income Tax Tips

Owning a small business or being self-employed allows you to create a business you are passionate about. It can also mean a more flexible work schedule and the chance to make more money than you did as an employee.

But there is one added burden for those who own small businesses or are self-employed: tax preparation.

That includes the burdensome task of keeping track of expenses, bookkeeping, and preparing income tax.

While income tax rates for those who are self-employed are the same as personal tax rates for employed workers, the Canada Revenue Agency allows you to make deductions that are more advantageous than those for the average employee.

These income tax deductions from income earned from self-employment can come from a sole proprietorship or a partnership. If your business is incorporated, you are not considered to be self-employed.

Below is a list of income tax tips for small business owners and those who are self-employed that can help make the challenges of income tax season less taxing.

Home Office Expenses

If you conduct your business out of a home office, you may be able to claim a portion of your housing costs.

This can include:

  • Rent/mortgage
  • Property taxes
  • Utilities
  • Maintenance
  • Telephone
  • Home insurance

Claiming Business Expenses

If you own a small business—whether online or a traditional brick-and-mortar operation—or are self-employed, you can deduct most business expenses provided they are used to help generate income for the business.

Office supplies and stamps, for example, are 100% deductible. Business expenses like lunch or entertainment (like tickets to a sporting event) can be claimed, but the maximum amount is 50%.

For expenses that include a personal and business component, you can only claim the portion of costs that relate to the business.

Capital Property Costs

Capital property includes assets that are used for your business, like furniture, computer equipment, furnishings, or a car.

You can write these costs off over time in the form of capital depreciation. That’s because capital assets wear out and become obsolete.

This is called a capital cost allowance (CCA). Different types of capital property have different CCA rates.

The annual rate for a car is 30% while the rate of furniture is 20%. For Manufacturing & Process machinery and equipment, Class 29, acquired after 2015, an accelerated CCA rate of 50% applies on a declining-balance basis.

FBC, Helping Small Business Owners Maximize Income Tax Deductions

Income tax rates might be the same for those who are self-employed as a typical wage earner, but it’s a whole different story come tax time.

Owning a small business or being self-employed comes with its own tax challenges. Your income could vary from month to month, making it difficult to come up with an appropriate tax rate.

You could also lose track of receipts, mix up personal expenses with business expenses, fall behind on taxes owing, and miss a filing deadline (and incur penalties).

All of this can be alleviated by using the tax experts at FBC.

Since 1952, FBC has worked exclusively with Canadian small business owners and farmers, helping them minimize their income taxes and maximize their assets.

Moreover, FBC is the only firm in Canada that offers integrated tax services on a year-round Membership basis. For a fixed fee, you get access to tax planning, tax preparation, business consultation, bookkeeping, accounting, and financial planning services.

To ensure your books are in order, FBC provides all new Members a review of their previous 3 years’ tax returns.

For more information on how an FBC tax consultant can help your small business, or agribusiness prepare and file your annual income taxes, call us today at 1-800-265-1002 or submit an online form and an FBC tax specialist will contact you at your earliest convenience.

Connect with your Local Tax Consultant to learn more

"FBC has helped to ensure our company is running as efficiently as possible. The FBC team is very approachable; we feel confident in relying on FBC to assist with making important business decisions to better improve our company. They take the time to understand what is important to us, and make a point to ensure we understand their advice and suggestions. We also very much appreciate how the FBC team makes themselves available to meet where works for us. Thanks FBC!"
- Julia Ostrowski, Communications Coordinator, Chris Hadfield Inc.