Top small business tax deductions

small business owner examines receipts for tax deductions

Top small business tax deductions

If you’re self-employed or a small business owner, you know how quickly business expenses can add up.

Luckily, there are plenty of tax deductions you can take advantage of to lower your taxes.

We’ve compiled this list to make sure you’re not overlooking any of the tax deductions available to you as a business owner.

Don't forget to keep your receipts you are required by law to keep a record of your transactions.

RELATED: 7 simple ways to organize your receipts.

Accounting fees

Fees for accounting, bookkeeping, tax preparation and finances can be deducted.

Bad debts

If you are owed money from a client but are unable to collect it within a year, you may be able to claim it.

Business advertising and promotional expenses

Some of these expenses include:

  • Online advertising
  • Advertising on Canadian radio and television stations
  • Canadian newspapers and magazines
  • Promotional materials like business cards and pamphlets
  • Sponsorship of local sports teams, and other branded charitable donations, can be claimed as advertising if the materials include your branding and logo

Business taxes, licenses and memberships

You can deduct annual licence fees (beverage, trade, motor vehicle licenses) and some business taxes (municipal taxes, land transfer taxes, gross receipt tax, health and education tax and hospital tax).

You can also deduct annual dues or fees for trade or commercial associations, as well as magazine subscriptions, if they’re expenses incurred to earn business income.

Note: golf club memberships are not tax deductible. They’re one of the items specifically restricted by the CRA when it comes to tax deductions.

Business-use-of-home expenses

You can deduct expenses for the business use of a work space in your home.

This includes part of your maintenance costs (cleaning materials, utilities, home insurance) along with part of your property taxes, mortgage interest and capital cost allowance.

You’re able to claim this expense as a tax deduction if the work space in your home is the principal place of business, or you use the space only to earn business income and meet regularly with your customers in the work space.

To claim this expense and avoid CRA scrutiny, make sure you’ve calculated the percentage of your home that’s used for your business and apply that percentage to the tax deduction.

For example, if you’re living in a 1,000-square-foot house, and your office is 100 square feet, you’re using 10 per cent of your home for business use. That means you can deduct 10 per cent of your expenses.

Let’s say your annual electricity bill is $1000. If you multiply that by 10 per cent, you get $100, which means you can deduct $100 for electricity on your tax return as a business-use-of-home expense.

Employee salaries and benefits

You can deduct employees’ gross salaries and other benefits incurred by you as the employer.

As the employer, you must deduct your part of CPP contributions and employment insurance premiums.

You can also deduct workers’ compensation amounts payable on employees’ remuneration. You can’t deduct salaries paid to yourself or to a partner.

Interest and bank charges

You can deduct interest on money that was borrowed for business purposes or for buying property for your business.

You can’t deduct the principal of loan or mortgage payments, or any money borrowed for personal purposes.

You can deduct the fee you pay to reduce the interest rate on your loan, along with any penalty a bank charges you to pay off your loan before it is due. Talk to your tax professional for more information.

Insurance premiums

You can deduct insurance premiums you pay for insurance on buildings, machinery, and equipment you use for your business.

Meals and entertainment

You can deduct 50 per cent of your total meal and entertainment expenses for business purposes.

Office expenses

This includes small items like pens, pencils, paper clips and stationary. You can’t claim calculators, filing cabinets, chairs and desks, which qualify as capital items.

Rent

You can deduct rent incurred for property used in your business.

Repairs and maintenance

You can deduct the cost of labour and materials for any minor repairs or maintenance done to property you use to earn income.

Tools and equipment

This includes eligible tools and electrical materials you bought in the previous tax year. The tools must be used specifically for your job and not for any other purpose before you bought them.

Vehicle expenses

If you’re self-employed and use your car for business-related activities, you can deduct a portion of your licence and registration fees, fuel and oil costs, insurance, maintenance and repairs and leasing costs.

Make sure you keep a logbook.

RELATED: How to keep a mileage log for vehicle expenses.

Book an appointment with FBC

FBC works with Canadian farmers and small business owners to minimize their income taxes and maximize their assets.

We're offering a no-cost, no obligation consultation to explain how you can make sure you’re taking advantage of all the tax-saving opportunities available to you.


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