Cut Your Tax Bill With These Creative Tax Deductions
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This document provides tips for making various business and personal expenses tax deductible. It suggests deducting costs such as office parties, business travel including "continuing education" seminars in desirable locations, home office expenses by charging rent to one's business, equipment purchases made towards the end of the tax year, and hiring and paying family members for work. It also discusses strategies for income splitting between an individual and incorporated company to minimize taxes owed. The overall message is that taxes can be reduced through creative accounting and maximizing deductions.
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Cut Your Tax Bill With These Creative Tax Deductions
- 2. What Is The Largest Single Expense In Your Life?
- 3. Tax!
- 7. 43.6%
- 10. Taxpayer Bill Of Rights “You have the right to pay no more and no less tax than what is required by law” - CRA, Publication RC4471
- 11. The Game
- 12. How Can I Make This Expense Tax Deductible?
- 13. The Game becomes one of Intellect and Creativity
- 15. Choose Yours Carefully The best tax professionals are fantastic communicators And highly creative problem solvers Not simply technicians Make sure these traits are present in the professional that you choose.
- 16. The Usual Stuff! Advertising Salaries, Wages & Benefits Business Taxes/Fees/Dues Start-Up Costs Telephone & Utilities Delivery Expenses Professional Fees Insurance Rent Office Supplies Loan / Line Of Credit Interest Management & Administration Fees Meals & Entertainment Business Travel Gasoline Automotive Maintenance Insurance 407ETR Depreciation of vehicle Lease payments
- 17. Write Off Vacations • The cost of business travel may be fully deducted, provided the business nature of the trip can be demonstrated. • Hotel, airfare 100% deductible. • Meals are still 50% deductible. • My Doctor and Dentist clients always have “continuing education” seminars in places like Bora-Bora and Tahiti. All are fully deductible .
- 18. Write Off The Office Parties • Six “Office Parties” are allowed per year. • You can spend up to $100 per employee and deduct it 100%. • Reasonable costs spent on existing or prospective clients can be 50% deducted. • Do some business at the party! • Product demo, sales pitch or educational talk
- 19. Deduct Your Kids • I recommend the child must be at least 14 • A market (minimum) wage must be paid to the child • A paper-trail must exist for the transaction (eg. cashed cheque). • The child must do actual demonstrable work for the business.
- 20. Make Your Mortgage Tax Deductible (partly) • Charge rent to your business or corporation • Must be used more than 50% of the time • Heat, Hydro, Water • Mortgage Interest • Home Insurance • Maintenance Expenses
- 21. Buy A Home Using Your Corporation’s Money • Employee loan is tax free as long as you are purchasing a home for own use. • Repayment must be clearly articulated. I recommend a loan document be drawn up. • Repayment must be within a reasonable time.
- 22. Buy New Equipment Towards End Of Tax Year • Depreciation (CCA) On Computers is 100% of it’s acquisition cost. This is treated as a direct business expense. • Depreciation (CCA) on Automobiles is 30% of it’s acquisition cost. This is treated as a direct business expense.
- 23. Income Splitting Corporation Versus Sole Proprietor
- 24. Personal Versus Corporate Tax Rates • Personal Top Marginal Rate • 48% combined federal and provincial • Incorporated Company “Small Business Deduction” marginal rate • 15.5% combined federal + provincial
- 25. Income Splitting Employee With Employment Expenses Sole Proprietorship Incorporated Company
- 26. Income Splitting Majority Of Expenses Attributed To Individual: Individual Employment Expenses Sole Proprietorship Majority Of Revenue Attributed To Incorporated Company
- 27. When Should You Incorporate When revenues are robust enough to be in excess of tax losses, then it’s time to think about incorporating.
- 28. Thank You!