Maximizing profits is the goal of any business. It can be achieved by either increasing sales or by reducing expenses. Taxation is also an expense that is fetched through net profits. You might have found that you forgot to include certain expenses that are eligible to be a tax write-off in many cases. In this article, we shed light on some eligible expenses for tax write-offs so that you can get the full benefit on your next tax period. You can also hire Small Business Accounting Services for the efficient handling of your corporate taxes.
Common tax deductions for small businesses
An expense that you can deduct from your taxable income is a tax deduction or tax write-off. You take the expense and subtract that from your taxable income. Tax write-offs allow you to reduce your tax bill. But the expense has to fit the tax authority criteria of a tax deduction. You can also hire accounting firms in Calgary to handle this task. If you don’t live in Calgary, you can easily find tax preparation services in your city. Following are seven different areas where you can save in tax write-offs.
1. Business insurance
The rule of thumb when identifying an expense as a tax write-off is, the expense must pertain to the business. Business insurance is one of such expenses. The insurance premium you pay for your business property, equipment, furniture, etc., is covered in the write-off category. In some instances, the insurance cover for you and your employee’s group life and health can also be deductible.
2. Event sponsoring
The marketing plan may include sponsoring the events held by some other organization. All amounts you pay for sponsoring such events are also legitimately used in calculating net income. This means your tax burden will be reduced accordingly. Sometimes you pay such expenses from your personal bank account or credit card. In that case, they are deductible if you can satisfy the tax authorities about the nature of payments that are, in fact, business payments.
3. Employee benefits and salaries
Every small business has a team to run its operations. There are staff in various departments and are paid accordingly. The payment made to them is tax-deductible. The leave encashment and other benefits, including any bonus paid to the employees are also included. Equally, if you hire freelancers or independent contractors to help your business, you can deduct their fees as a business expense. Just remember that the tax authorities may have placed a limit to how much you can write off.
4. Rental expense
If you rent a business location or hire equipment for your business, then you can deduct the rental payments as a business expense from your business income. However, it must be kept in mind that the rent paid on your home should not be deducted as a business expense, even if you have a home office. However, such rent can be deducted as a part of home office expenses.
5. Business transportation
Business transportation is of two types. One is about commuting you and your staff for business purposes, and the other pertains to the moving of business equipment and inventory. Both types of expenses are tax-deductible and must be appropriately recorded to be eligible for tax write-off. Likewise, business travel is a significant expense in some fields, depending upon the nature of the industry. The payments for business travel are also tax-deductible and can be claimed when filing the tax return. You can also hire professional small business accounting services to help you to save more on your net tax returns.
6. Advertisement and promotion
You may deduct advertising expenses in full on your tax return, no matter what advertising media you use. That may include costs related to printing business cards to Facebook advertising campaigns and everything in between. Expenses related to marketing often fall under the category of “advertising expense.” Promotional activities like giveaways are also admissible.
7. Bank fee and interest
A bank fee is levied on the banking transactions and bank account maintenance. These bank charges are tax-deductible too if these are made in the business bank account(s). Similarly, the interest on bank overdraft or bank loans is also chargeable against income is thus tax write-off. It is needless to reiterate that such expenses should be of business and not personal.
Although this article only discussed a few key tax write-offs, tax write-off expenses can include rent, advertising and promotion, business meals, business insurance, business interest, legal and professional fees, salaries, and benefits, telephone and internet expenses, travel expenses, bonuses, personal expenses, and many more. It is important to note that the professional accounting firms in Calgary and other areas have experts that can support you in identifying the tax-deductible expenses and thus reducing your tax bill.