Pay Less Tax: Running a business can be a lot of work and everyone wants to keep as much of what they make as possible, so tax-saving becomes even more important in that case.
Here, we have listed 8 easy yet effective ways by which you can pay less tax in Canada, make sure to check out the bonus tip at the end.
8 Simple ways to play less tax in Canada
8 Simple ways to play less tax in Canada
The 8 Simple ways to play less tax in Canada are as follows:
Keep complete records
Pay Less Tax: Never lose any receipts, be very careful with them, losing a receipt means missing out on tax deductions, try to keep electronic copies of your recipes it will help you to stay very well organized, but don’t forget about hard copies file them safely in case you get audited.
File your taxes on time
Pay Less Tax: For the people who are self-employed June 15th is the last date to submit taxes, and don’t forget to pay your tax bill on time to the Canada Revenue Agency (CRA) to avoid any late fees. According to CRA if you pay tax after June 15 deadline, you’ll have to pay a late penalty of 5% and 1% interest every month thereafter
Hire a family member
Pay Less Tax: As far as tax-saving goes, hiring a child or your spouse and paying them a salary can be a really good idea, For 2022, the first $14,398 of a family member’s earned income is tax-free (i.e., the “basic personal amount”), and their wages count as a tax deduction for your business. Just make sure the wages are reasonable and keep a paper record to prove the job was done.
Separate personal expenses
Pay Less Tax: Get in a habit of paying for any work-related expenses with a separate business credit or debit card. It will simplify your record keeping and likely avoid being red flagged with a CRA. If an expense falls within a gray area, such as a bathroom issue for your home office, be sure to note how it relates to your receipt work.
Invest in RRSPs and TFSAs
Pay Less Tax: Tax-friendly savings plans are a great way to save for retirement and reduce your tax bill. The Pension Savings Plan (RSP) will allow you to protect your savings from taxes; A tax-free savings account (TFSA) allows you to withdraw money without penalty.
Check your RSP exemption limit on your latest valuation notice from CRA.
The TFSA contribution limit for 2017 is $ 5,500.
Write off losses
Pay Less Tax: If you have ever had an unpaid customer, suffered a loss of capital, or your business has been the target of theft, those losses can be added as legal tax deductions.
Deduct home office expenses
Pay Less Tax: Things like apps, internet fees and trademarks are often overlooked by business owners who run a home-based business or use a home office. The CRA is required to calculate the percentage of your home space allocated for commercial use to determine the area you can claim for rent, mortgage interest, utilities and other expenses.
Claim moving costs
Pay Less Tax: If you have moved at least 40km to run your business, you may incur a number of related costs, including transportation and savings fees, real estate commissions and fees for connecting or disconnecting applications.
Final Tip: An accountant can save you money by detecting unknown tax deductions. Consider working with an accountant who is familiar with your particular type of business.
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