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As a small or medium business owner in Alberta, you are constantly looking for ways to maximize your savings and reduce your tax liability. One effective strategy is to take advantage of eligible business expenses that can be claimed as write-offs. At Richardson Miller LLP, we understand the importance of optimizing your tax deductions and reducing your business tax liability. In this blog, we will highlight the top 11 tax write-offs available for small and medium businesses in Alberta, helping you save money and achieve financial success.

What is a Tax Write-Off?
A tax write-off, also known as a tax deduction, is an expense that can be legally deducted from your taxable income. By strategically identifying and claiming eligible expenses, you can reduce the amount of income subject to taxation. This ultimately helps you lower your overall tax liability in that tax year and keep more money in your pocket.

Tax Write-Offs for Small Businesses

1. Office Rent and Utilities

Do your run your business in office or building? Did you know that you can deduct a portion of your office rent and utility expenses? This includes rent payments, property taxes, insurance, and utilities such as electricity and internet.

When it comes to office rent, small business owners can deduct a portion of their monthly rent payments. This applies whether you have a dedicated office space or if you work from a home office. The key is to calculate the percentage of your home or office space that is used exclusively for business purposes. This percentage will determine the portion of your rent that can be deducted.

In addition to rent, other expenses related to your office space can also be deducted. This includes property taxes and insurance premiums specifically tied to the business portion of your property.

Utility expenses such as electricity and internet are also eligible for deductions. Just like with rent, you will need to determine the percentage of these utilities that are used for business purposes. This can be done by calculating the square footage of your office space in relation to the total square footage of your home or office.

Small businesses spend an average of 11% of their total expenses on rent and utilities. Source: Statistics Canada

 2. Business Travel Expenses

If you travel for business purposes, you can deduct expenses such as airfare, hotel accommodations, meals, and transportation.

The Canada Revenue Agency (CRA) allows you to claim reasonable and necessary travel expenses incurred for business purposes. This includes travel within Canada, as well as international travel. However, it’s important to note that personal travel expenses cannot be claimed under the guise of business use.

When it comes to airfare, small business owners can deduct the cost of flights or other transportation expenses related to business travel. This includes airfare, train tickets, and rental cars. Hotel accommodations are also eligible for deductions, as long as they are reasonable and necessary for business purposes.

Meals and entertainment expenses can also be deducted, but only up to a certain percentage. Generally, the CRA allows for a 50% deduction on meals and entertainment expenses. However, it’s important to keep detailed records of these expenses, including who was present and the purpose of the meal or entertainment.

 3. Vehicle Expenses

Do you have a vehicle that you use for your business? If so, you can claim deductions for expenses such as gas, maintenance, insurance, and lease payments. These deductions can significantly reduce your taxable income and help you keep more money in your pocket. However, it’s important to keep detailed records of your business mileage to support your claims.

To claim vehicle expense deductions, it’s critical to maintain accurate records of your business mileage. This includes tracking the date, starting and ending locations, and purpose of each trip. You can use a mileage logbook or smartphone app to make this process easier. With detailed records, you can confidently claim the deductions you’re entitled to while minimizing the risk of an audit.

Benefits of Vehicle Expense Deductions

By taking advantage of vehicle expense deductions, you can:

  • Reduce Tax Liability: Lower your taxable income, resulting in decreased tax payments.
  • Increase Cash Flow: Keep more money in your business, allowing for reinvestment or growth.
  • Boost Profitability: Optimize your financial performance by minimizing unnecessary expenses.
  •  Improve Business Efficiency: Use your vehicle expenses to streamline your operations and improve productivity.

4. Home Office Expenses

If you operate your business from a home office, you may be eligible to deduct a portion of your home expenses such as rent or mortgage interest, property taxes, utilities, and maintenance costs. These deductions can significantly reduce your taxable income and help you keep more money in your pocket. However, it’s important to ensure that you meet the specific criteria set by the Canada Revenue Agency for claiming home office expenses.

For example, your home office must be your primary place of business, and it must be used exclusively for business purposes. You must also be able to demonstrate that your home office is a clearly defined workspace and that it is used regularly and continuously for business purposes.

Benefits of Home Office Expense Deductions

By taking advantage of home office expense deductions, you can:

  •  Reduce Tax Liability: Lower your taxable income, resulting in decreased tax payments.
  •  Increase Cash Flow: Keep more money in your business, allowing for reinvestment or growth.
  •  Boost Profitability: Optimize your financial performance by minimizing unnecessary expenses.
  •  Improve Work-Life Balance: Operating from a home office can provide flexibility and improve work-life balance.

 5. Professional Services

When you run a business, you will inevitably use professional services such as lawyers, accountants, and consultants. These fees can be claimed as business expenses, which can help reduce your taxable income and lower your tax liability.

Hiring professionals such as lawyers, accountants, and consultants can help ensure compliance with tax laws and provide valuable advice for your business. For example, an accountant can help you keep accurate financial records, file your taxes on time, and identify areas where you can save money on taxes. A lawyer can help you navigate legal issues related to your business, such as contracts and intellectual property. A consultant can provide specialized expertise in areas such as marketing, human resources, or operations.

It’s important to keep detailed records of the services provided and the fees charged. This will help you accurately calculate the amount that can be deducted on your tax return. In addition, it’s important to ensure that the fees paid are reasonable and necessary for your business.

Overall, hiring professionals can provide valuable support for your small business and help ensure compliance with tax laws. By claiming these fees as business expenses, you can reduce your tax liability and reinvest those savings back into your business. However, it’s important to keep accurate records and consult with a tax professional to ensure you are maximizing your eligible deductions within the guidelines set by the Canada Revenue Agency (CRA).

 6. Advertising and Marketing

Expenses related to advertising and marketing your business can include a wide range of costs. This includes the cost of online ads, such as pay-per-click campaigns or social media advertising. It also includes expenses for print ads, such as newspaper or magazine advertisements. Additionally, costs associated with website development and maintenance can be claimed, as having a strong online presence is crucial for many businesses today. Furthermore, expenses for promotional materials like business cards, brochures, and branded merchandise are also eligible for write-offs.

Small businesses spend an average of 2% of their total expenses on advertising. source: – Canadian Federation of Independent Business (CFIB). 

7. Office Supplies and Equipment

Purchases of office supplies such as stationery, printer ink, and computer software can be claimed as write-offs. These expenses are necessary for the day-to-day operations of your business and can add up quickly.

In addition to office supplies, if you buy equipment such as computers or furniture for your business, you may be eligible for capital cost allowance (CCA) deductions. This allows you to deduct a portion of the cost of the equipment each year, based on the depreciation of its value over time. This deduction can help reduce your tax liability in the year that the equipment is purchased and in subsequent years.

It’s important to keep accurate records of these expenses and equipment purchases, including receipts and invoices. This will help you accurately calculate the amount that can be deducted on your tax return. In addition, it’s important to ensure that the expenses and equipment purchases are reasonable and necessary for your business.

 8. Employee Salaries and Benefits

Salaries, wages, and bonuses paid to employees are considered necessary expenses for the operation of your business. These payments are eligible for deduction as long as they are reasonable and directly related to the services provided by the employees.

In addition to salaries and wages, contributions to employee benefit plans are also deductible expenses. This includes contributions made towards health insurance plans, retirement savings plans (such as Registered Retirement Savings Plans or RRSPs), or other employee benefit programs. These contributions not only provide valuable benefits to your employees but also offer tax advantages for your business.

It’s important to keep accurate records of these payments and contributions, including payroll records, benefit plan statements, and receipts. This will help you accurately calculate the amount that can be deducted on your tax return. Additionally, it’s crucial to ensure that the salaries, wages, bonuses, and benefits provided are reasonable and in line with industry standards.

Small businesses in Canada employ approximately 8.3 million people, accounting for 70.5% of private sector employment. Source: Canadian Federation of Independent Business (CFIB)

9. Training and Professional Development

Expenses related to training and professional development for yourself or your employees are considered necessary for the growth and improvement of your business. This includes registration fees for conferences, seminars, courses, and workshops. These events and programs provide valuable opportunities to enhance skills, gain knowledge, and stay updated with industry trends and best practices.

By claiming these expense as small business tax deductions, you can not only invest in the development of yourself or your employees but also reduce your tax liability. It’s important to keep accurate records of these expenses, including receipts, invoices, and proof of attendance.

Small business owners can foster a culture of continuous learning and development within their organizations. This can lead to improved skills, increased productivity, and ultimately, business growth. However, it’s important to keep accurate records and consult with a tax professional to ensure you are maximizing your eligible deductions within the guidelines set by the CRA.

10. Bad Debts

It has happened to so many businesses, bad debts! If you have outstanding invoices that have gone unpaid or debts that are deemed uncollectible, you may be able to claim them as write-offs, helping to reduce your taxable income and lower your overall tax liability.

When a customer or client fails to pay an invoice, it can have a negative impact on your business’s cash flow. Did you know that the Canada Revenue Agency allows you to claim these unpaid invoices or bad debts as deductions, recognizing the financial loss incurred?

To claim these write-offs, it’s important to keep documentation and evidence of the unpaid invoices or bad debts. This includes maintaining records of the original invoices, communication attempts, and any supporting documentation that demonstrates your reasonable efforts to collect the debts. These efforts may include sending reminders, making phone calls, or engaging in collection activities.

It’s crucial to note that before claiming a bad debt as a write-off, you must make reasonable efforts to collect the debt. This means demonstrating that you have taken appropriate steps to recover the amount owed. The CRA requires that you have exhausted all reasonable means of collection before claiming the debt as uncollectible.

11. Charitable Donations

When you make a donation to a registered charity, you are not only supporting a worthy cause but also receiving a financial benefit. To claim these write-offs, it’s important to keep documentation and evidence of the donations made. This includes maintaining records of the donation receipts, which should include the name and registration number of the charity, the date of the donation, and the amount donated.

It’s important to note that not all charitable donations are tax deductible. The charity must be registered as a qualified donee, and the donation must be made voluntarily, without any expectation of receiving something in return.

Under the Income Tax Act, qualified donees are organizations that can issue official donation receipts for gifts they receive from individuals and corporations. Registered charities can also make gifts to them. source: canada.ca

Supporting charitable causes not only helps the community but also provides tax benefits for your business. By claiming these donations as write-offs, small business owners can reduce their tax liability while also making a positive impact on society.

By leveraging these top 11 tax write-offs for small and medium businesses in Canada, you can reduce your tax liability and maximize your savings. However, it’s important to consult with a professional accountant like Richardson Miller LLP to ensure compliance with tax laws and optimize your deductions. Contact us today to learn more about how we can help you navigate the complex world of business deduction strategy and achieve financial success.

Choosing the right account is important.

In a previous article, I discussed what CPA means and why it is important to choose an accountant with the CPA designation. Now I want to talk about other considerations when choosing an CPA that is the right fit for you or your company.

Does your accountant have relevant experience?

First, I would like to talk about experience.

  • How long have they been working in public practice?
  • Have they been around for many years or did they just decide to open up shop one day and may be gone the next?
  • What about the type of clients and industry they have past or current experience with?

When meeting with a potential new accountant, you should feel free to ask how long they have been in practice. You should also ask about their existing client base to find comfort that they have experience in your industry.

What is the accountant’s availability and communication like?

Another important consideration is availability.

  • Does your accountant return your phone calls and emails in a timely manner?
  • Do they have a partner or staff that can assist you with urgent matters if they are on holidays?

It is imperative to know that if something unforeseeable happens that prevents your accountant from continuing their practice that there is someone available to assist you.

Does the accountant have a strong professional network?

It can be beneficial to clients when an accountant has a team of people that they can rely on to take care of the needs of their clients.

  • What about their contact sphere?
  • Do they have other professionals they trust and work with regularly that you may also need?
  • If you find yourself in need of a new bookkeeper or a corporate lawyer, does your accountant have connections that may help you?

Are you comfortable discussing hard topics with the accountant?

Now let’s discuss comfort level.

You only need to talk to your accountant once a year so it doesn’t matter if you like them and feel comfortable with them, right? Wrong!

Your accountant should know all your confidential financial information and you should be comfortable to discuss this with them. The more your accountant knows about you, the more likely they will be able ensure that you are utilizing all the tax credits and deductions available to you. The more comfortable you are with your accountant, the more likely you also are to ask questions if you do not understand something.

It is important for a taxpayer to have some basic understanding of their financial statements and income tax return.

The partners of Richardson Miller LLP Chartered Professional Accountants have a combined 35 years of experience in public practice in several different industries. Our clients are important to us and we pride ourselves in our client relationships. We know that the world of tax is complex and confusing, so we aim to educate our clients in a way that is understandable and relevant to them.

CPA makes a difference in your protection

Have you ever looked for professional accounting services and been overwhelmed by the number of businesses to choose from? Have you ever noticed some of these companies have a Chartered Professional Accountant and some do not? What does Chartered Professional Accountant, or CPA, even mean?

Let us help shed some light on this.

Chartered Professional Accountants Association aka CPA

The Chartered Professional Accountants Association is a professional regulatory body that focuses on protecting the public. What does CPA stand for? When an accountant has CPA after their name that means they have completed:

  • a university degree (or equivalent);
  • a couple of years of practical work experience;
  • and professional level exams in order to receive the CPA designation.

An ongoing 40 hours a year of professional development is required to maintain the CPA letters. The Association protects the public by ensuring its members meet their high professional conduct and ethical accounting standards. They continue to monitor CPA firms to ensure ongoing competency, absence of professional misconduct, and validity of applicants for membership

Who is regulating the non-CPA firm to ensure they are qualified as well?

Unfortunately, in Alberta, there is no law to prevent anyone from calling themselves an “accountant”. It is the old “buyer beware”; if there is no CPA in the firm name or behind the accountant’s name, there is no one regulating the work being performed.

If the strict monitoring of a CPA firm isn’t enough to help you make a choice, you should also consider current and future financing. Depending on the level of financing, financial institutions may require a company’s financial statements to be prepared by Chartered Professional Accountant.

Check out the CPA Alberta website for more information on protecting the public or to verify that a chartered accountant, or a firm, is registered with the CPA Alberta Association.

How Can a CPA Help Me?

A chartered professional accountant can offer a variety of services to ease the burden of finances. Professional accountants can offer tax services, manage audits, and perform CFO functions. As a business owner, the business is your top priority. Hiring a chartered professional accountant to manage your finances gives you the extra time to invest in your business. CPAs can perform financial services in less time, with fewer clerical errors, and with a wider range of knowledge gained from education and experience.

“Many businesses choose to work with chartered accountants because of so many reasons. These professionals are experienced and vigorously trained to handle all tax and finance-related problems. Yes, hiring a chartered accountant will be an added expenditure, but the money they help you save will certainly outweigh those costs.” source: Small Business Sense

Investing in a CPA is investing in your business

Tax planning can assist you in saving thousands of dollars. Proper planning and filing of forms help you to avoid audits, penalties, or late filings. CPAs are professionally trained and knowledgeable on tax laws and how to use them to their advantage. We all know the headache of cutting through the red tape of taxes. CPAs will slice through and come out saving you in the end.

Nothing is certain in life except death and taxes. What comes with taxes? Audits. Chartered accountants can help protect your business and prepare you for the inevitable. Having a chartered professional accountant backing you when the Canadian Revenue Agency comes knocking is the highest reassurance one can have. They will know the proper steps and procedures to appease the CRA. Knowing your finances have been professionally prepared and documented takes all the burden during this potentially stressful time.

Did you know that chartered accountants can do more than just taxes?

CPAs can fill the role of Chief Financial Officers, CFOs. They can help manage expenses, perform payroll analysis, and assist in financial planning for the future. Outsourcing the role of CFO helps businesses have a professional perspective of the entirety of their finances. Along with business owners and management, CPAs can help develop solid financial plans to ensure the growth of businesses.

With ongoing training and certified professional education requirements. chartered professional accountants a wealth of knowledge available to business owners. Laws and industry standards are constantly changing. CPAs make staying on top of these changes their job. Knowledge is power and nothing comes close to the strength of CPAs when it comes to finances. This powerful ally is waiting to be called on whenever necessary.

Industry-Specific CPAs

Within the Accounting Industry, the CPA profession is diverse as the businesses they serve. CPAs can choose to specialize in certain areas of the accounting profession. A chartered professional accountant’s specialty can vary based on the size of the business they wish to represent, the types of businesses, or even accounting services they have honed throughout their accounting career. Business size has a massive impact on money management.

CPAs choosing to specialize in small businesses will have many more strategies and methods to best serve their clients. CPAs choosing to focus on a type of business within a specific service or industry will have more knowledge of the laws and regulations of this field. They are trained and educated in all areas of the accounting profession, however, CPAs can be more proficient in some services.

Hiring a Chartered Professional Accountant is important for your business. We have a proven track record of success and are qualified and motivated to provide you with the best financial advice and tax strategies for your business.

Click here to contact us today and learn more about how we can help your business grow.