Tax season is probably one of the most, if not the most, dreaded season of small business owners. Unfortunately, there’s no avoiding taxes – the good news though is there are ways they can legally minimize their tax burden.
Here are 5 tax tips that can help small business owners save a lot come tax time.
- CLAIM HOME OFFICE DEDUCTIONS
Many small business owners are not aware that they can claim a portion of their household expenses if they work from home. These expenses include rent, utilities, property tax and mortgage interest. Though you cannot claim 100% of these expenses, claiming a portion will still save you a lot come tax time.
- PURCHASING CAPITAL ASSETS AT YEAR END
As a business owner, if you are thinking of buying, say a new computer, you should make the purchase later in the year. By doing so, you can claim a full year depreciation even though you’ve only used the item for a few weeks.
- GET YOUR SALARY/DIVIDEND MIX BALANCE RIGHT
A small business owner is entitled to withdrawing cash from the business, either as a salary or dividend or a mix of both. All three have their own advantages and disadvantages. The key is to determine what mix will maximize your earnings. Determining the right mix can be complicated and confusing so it is always best to ask an experienced accountant to help you get your salary/dividend mix balance right.
- INCOME SPLITTING WITH FAMILY MEMBERS
Paying your spouse or children reasonable salary or wage from your business is deductible. The key word here is REASONABLE, meaning the salary paid should match the amount of work or services your family member has provided your business. Income splitting is a great way for business owners to save on taxes and to keep the income within the family.
- DETERMINING AND TAKING ADVANTAGE OF ALL THE ELIGIBLE TAX CREDITS AND FILING THE RIGHT ELECTIONS
Being aware of all the eligible tax credits available will enable you to take full advantage of these credits and minimize your tax credits. For example, if you are hiring an apprentice you may be eligible to apply for the Apprenticeship Job Creation Tax Credit (AJCTC). The AJTC is a non-refundable tax credit equal to 10% of the eligible salaries and wages payable to eligible apprentices employed after May 1, 2006. The maximum credit an employer can claim is $2,000 per year for each eligible apprentice.
Running and maintaining a business is costly, the good news is that there are many ways to reduce those costs. You just have to know how. So, take the time to do your research, ask the right persons and file your taxes correctly and knowledgeably.
Let us help! Contact us today and we will make sure to answer your tax questions and explain all your options so you don’t miss any eligible exemptions and deductions and can take advantage of all possible tax benefits and minimize your tax liabilities.