There are a wide array of expenses that you can write off on your business taxes, many of which you probably unaware of.
If you own a small business in Ontario, you likely have a strict budget that you’re attempting to stay under while also growing your business. One way that you can minimize the amount of money you spend is by writing off some of your expenses when filing your taxes, which can help you pay less taxes.
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Read the following for the list of uncommon expenses you can write off.
Standard Items You Can Write Off
The most common items that small businesses can write off when doing their taxes in Ontario are expenses related to their home office.
If you currently work from a home office as opposed to a commercial building, you may be eligible for certain deductions pertaining to these expenses.
The home-office expenses that you can write off include:
- Utilities
- Mortgage interest on the residence that you own
- Your home insurance
- Your property taxes
- Any general maintenance and repairs that are done to the property
The amount of expenses that you can write off for your home office depends on what percentage the home office space is of your entire home.
There are also numerous vehicle expenses that you can write off on your taxes if you use your vehicle as a part of your job.
These expenses include:
- Fuel and oil
- Car insurance
- Capital cost allowance if you currently own the vehicle
- Lease payments if you’re leasing the vehicle
- Toll charges that you’ve racked up throughout the year
- Parking expenses
- Vehicle registration fees
The vehicle expenses that you can claim depend on the percentage of your total driving that was related to your work.
If 25 percent of your total driving for the year was done for business purposes, you can deduct 25 percent of the vehicle expenses that have accumulated during the year.
Keep in mind that a detailed logbook must be kept of all of your vehicle expenses if you would like to write them off come tax season.
Writing off office rent
Another common item that you can write off when filing your taxes is the office rent that you pay. If you rent office space, the payments that you make to a landlord are considered to be tax deductible.
In the event that you are ever audited, it’s important that you’re able to provide lease receipts and a rental agreement.
Less Common Items That You Can Write Off
While home-office expenses and vehicle expenses are the common items that a business can write off, there are numerous uncommon items that you can consider writing off for your taxes as well.
- For instance, the money that you spend on legal fees during standard operation of your business is actually tax deductible.
- The same is true of your meals and entertainment. Around 50 percent of the total amount that you spend on meals and entertainment during the year is tax deductible as long as you can provide a receipt.
There are, however, instances where you can write off 100 percent of the expenses:
- These include staff parties and events as well as meals and entertainment that are provided during a charity fundraiser.
It’s possible to write off some of your expenses for advertising. However, this only applies to certain types of advertising.
- For instance, any expenses that you’ve paid for online advertising can be deducted.
- This includes the fees that you spend for your website hosting and domain name registration.
- If you place ads on TV or radio stations, these expenses may be deducted.
However, the ads will need to be placed with Canadian stations if you want to deduct them.
Any ads that you place in Canadian magazines and newspapers can be 100 percent deducted as well.
If you want to write these ads off, 80 percent or more of the content within the ads must be journalistic in nature.
If the ad is comprised of less than 80 percent of journalistic content, only 50 percent of the advertising expenses can be deducted.
The various types of insurance that you can write off when doing your taxes include
- General business liability insurance
- Business interruption insurance
- Business property insurance
- Life insurance.
Depreciation on your assets can also be written off up to a certain amount. These amounts include:
- 30 percent per year for vehicles
- 20 percent per year for furniture and fixtures
- 4 percent per year for your building
- 55 percent per year for computers and related equipment
- 50 percent per year for software
Now that you’re aware of all of the common and uncommon items that you can write off when doing your taxes, you should be able to reduce the amount of taxable income for your business, which will result in less taxes needing to be paid.
One of the best ways to ensure your business taxes are done right, and that all your expenses are applied, call your local bookkeeper and tax expert.