If you run a small business, you want to make the most of all the tax deductions available to you. Here, we share our CPA insider tips to help optimize tax deductions so you understand all the business purchases you didn’t know were tax deductible.
Business Purchases You Didn’t Know Were Tax Deductible
Business Taxes
There are several business taxes you can claim for business purchase tax deductions depending on the type of business you operate. This includes municipal taxes, land transfer taxes, gross receipt taxes, health and education taxes, and hospital taxes.
Business Licenses
If your industry has annual license fees such as trade licenses or even vehicle registration permits, you can use these costs as tax deductions. Small business owners often overlook these. Although the fees might not seem substantial enough to claim, every little bit counts.
Memberships
Your industry, trade, and commercial memberships/annual dues are also tax deductible. This is an incentive to leverage networking through industry memberships that can help you make meaningful connections to grow your business, as well as increase your industry knowledge.
Publication Subscriptions
Keeping up to date on the latest trends, market conditions, and innovations in your industry is easier when you subscribe to relevant trade publications. These subscription fees are also tax deductible, making them a worthwhile investment to inform yourself and your team and make smarter business decisions.
Advertising
If you find you’re constantly slashing your advertising budget, keep in mind that some advertising expenses are tax deductible business purchases, including Canadian newspapers, television and radio ads, and digital advertising. You can also deduct any amounts you pay out as a finder’s fee, as well as the following:
- Website costs incurred to set up and maintain your website, as well as fees such as hosting, development, SEO, domain names, etc.
- Email marketing services that charge a subscription fee
- Promotional materials such as branded items, brochures, pamphlets, etc.
- Product samples
- Conference expenses, such as booth rental and travel expenses
- Creative marketing services such as logo design, promotional materials, etc.
- Subscriptions to design platform services and software for in-house use
- Social media management and subscriptions
- Affiliate commissions
- Brand development expenses such as event sponsorships
Office Supplies
Your basic office supplies are also deductible yet are often overlooked because they seem like such tiny purchases. However, you must keep in mind that the more deductions you claim, the lower your income and taxes. The next time you make a purchase at your local office supply store, even if it’s just a package of paper clips or a few pens, keep those receipts.
And don’t forget customized items like stationery and business cards. Just remember that when it comes to larger purchases like office furniture or even a calculator, these items fall under capital items.
Business Supplies
These are the supplies needed to run your specific type of business. For example, a veterinary office can deduct drugs and medications used to treat animals, a cleaning service can deduct items such as cleaning supplies, and a daycare can claim kids’ snacks. If you’re not sure what is considered business supplies, speak to a CPA specializing in taxes to take full advantage of these deductions.
Business Travel
Business travel tends to be a more commonly claimed expense, but what you might not realize is this includes public transportation fares. If you choose to use public transportation instead of your own vehicle when attending to business needs, investing in a separate card for business purposes makes it easier to track and claim these expenses. Another thing to consider is there is a 50% limit related to meals, beverages, and entertainment, so be sure you are compliant with this detail when preparing your taxes.
Also, if you use your personal vehicle, you can only make claims for fuel and parking based on each business-related trip. Be sure all travel-related receipts record the date, destination, and purpose of the trip for audit purposes. The last business travel deductible is the total kilometres used for business purposes. Again, keep a log of the date, destination and reason for every kilometre claimed and apply a percentage to the total business travel. For example, if you drove 10,000 kilometres with 1,000 business kilometres, you would claim a 10% deduction.
Home Office Expenses
Often, business owners who rent or own commercial space for their operations forget they can also claim home office expenses if they spend time working from home. This includes a percentage of the following:
- Telephone (usually not your home phone)
- Gas or oil
- Electricity
- Water
- Cable / Internet
When we say a “percentage”, you can calculate how much you can deduct based on the space used in your home and the amount of time spent working from home. For example, if you have a 10-room home, and your office is a separate room, you can claim 10% of your utilities. For something like internet, you must evaluate the time you use the internet for your business (how many hours per day x how many days per week).
Uniforms And Dry Cleaning
Although you are limited on the type of dry cleaning, you can claim uniforms and related dry cleaning expenses as tax deductions. However, the uniforms are part of your capital costs, so be sure to file them appropriately.
Business Gifts
Gifts given to customers and business associates are tax deductible if they fall under the following qualifications:
- The person is a business associate
- The gift has a business purpose
- The amount spent on the gift is reasonable, such as a gift basket as opposed to a vehicle
- You only deduct 50% of gifts for meals or entertainment, including gift cards, and include them under meals and entertainment
You want to ensure the gift will pass the audit test and avoid suspicion. For example, buying a gift for the wedding of a business associate’s daughter is likely not to qualify. Recording the purpose and recipient of each gift is important for auditing purposes.
Another tip is that when claiming gifts given to clients/customers, always claim these under marketing/advertising/promotions unless the gift is a meal or form of entertainment. Gifts to not-for-profit organizations should be donated to registered charitable organizations that will provide an official donation receipt.
You can be sure to leverage these tax-deductible business purchases and more by working with a bookkeeping, accounting, or corporate tax service.
Call today to learn how Intrepidium can help you maximize business taxes at 778-800-7976, or click here to schedule a consultation.
