Furniture and Equipment

Your office furniture, computer hardware and software, printer, fax machine, copier and other equipment, etc., have to be depreciated over time using the capital cost allowance (CCA) formula, which lets you deduct a portion (generally 20 per cent to 100 per cent) each year. The concept of depreciation is the cost of the asset has to be spread over the projected useful life of the asset. If you have an incor­porated business, you can sell your business furniture, computer and car to your business at fair market value. In doing so, you pay no personal income tax on the proceeds, as you originally bought the assets with after-tax income.

Salaries:

Salaries paid to children, spouses, relatives or others to perform work for your firm are all deductible expenses. Payments should be reasonable, and the arrangements structured properly to avoid problems in case of an audit. For example, your family members who are computer literate (e.g. any child from five years of age and up!), could be doing website design and development, marketing research, bookkeeping, data management, packaging or order fulfillment, and many other business-related services that you otherwise would pay others to do. With good tax strategic planning and the provision of legitimate services, your children could earn up to approximately $9,000 in tax-free income a year.

Entertainment:

You can deduct 50 per cent of your total meal costs (including alcohol, taxes and gratuity) relating to promotion or other eligible purposes–for example, when you take a prospective or existing customer out to lunch or dinner, or someone who is knowledgeable in the industry whose expertise and opinion you want to benefit from. If you attend a trade show and pay for lunch for yourself, you can take 50 per cent of that cost. Keep all receipts and note on them at the time before you forget, who you had the meal with and the nature of the business.

Education:

If you attend any seminar, conference, con-vention or trade show relating to your current or future business interest or operation, keep all receipts; they are 100 per cent deductible. Don’t forget to include any parking costs. Also, all subscriptions to magazines and newspapers or online services are tax-deductible if you are incurring those expenses to keep your know-ledge current (keeping abreast of trends, ideas, the competition, pending legislation, the economy, etc.). And don’t forget Internet-related costs, such as ISP fees—you are incurring these expenses for research and other business-related purposes.

Travel:

This is one deduction many people don’t fully understand. With proper tax advice and planning, you should be able to claim up to 100 per cent of all costs, except meals, which would be at 50 per cent. The percentage and eligibility of deduction depends on whether your trip was deemed to be business-related exclusively (100 per cent) or partially (50 per cent). In the latter case, the other 50 per cent could have been a personal vacation.

Remember to obtain professional tax advice, which is customized to your specific situation on an ongoing basis. Adopt the attitude that all the expenses that you incur have some legitimate direct or indirect business-related function, so get into the habit of keeping organized receipts of every-thing. Your accountant can let you know at the end of the year, what is or is not deductible and what portion. It is a good approach to try not to pay cash for anything, and use a credit card so that you have a monthly reminder and record of your expenses for your bookkeeping purposes.
Request a copy of the current year’s free publication Business and Professional Income Tax Guide from CRA. Ask your accountant about all the tax saving strategies available to you on oa regular basis. And most importantly, remain proactive about maximizing your deductions. As the saying goes, “It’s not what you make, it’s how much you keep that’s important.”