The Advantages of Having a Business during Tax Time

You’ve finally gotten a wonderful name for that beautiful business idea, you have the business plans well crafted out and you are good to go! Owning a business of your own comes with several unique benefits. First, owning your own business gives you freedom in controlling your ability to determine your schedule and income.

However, owning your own business does not mean that you will be free from tax payments. However, one thing to note is that the way you manage your taxes will certainly be different as a business owner. It is therefore vital that you are aware of the disadvantages and advantages that come with owning a business of your own. You can then proceed to determine if you can handle the responsibility. It’s always a smart decision to ask tax preparation service professionals to handle the tax responsibility to save money on tax and to get the full advantage of having a business during your tax time.

Save money on tax with these advantages of having a business during tax time

Let’s reveal the advantages of having a business during tax time. If you are aware of these 7 advantages, you can easily save money on tax with business.

Tax responsibility

One thing about being an employee is that you do not have to bother your head about saving a portion of your income for taxes. Also, employers usually handle the taxes of their employees and they usually make the necessary deductions. Thus owning a business requires some measure of discipline as regards the payment of taxes. The amount you owe to the CRA is largely dependent on the amount of money you earn. Therefore, if you do not separate the amount you ought to pay for taxes, the implications are enormous. For instance, there will be accrued interest on the delayed payments in addition to the fact that the CRA may place a lien on your property or bank account.

The medical deductions angle

Even though being disciplined with your taxes as a business owner can be quite challenging, owning a business puts you in an advantaged position of getting several deductions to help lessen the tax liability. Usually, employers pay a certain percentage of the health care costs of their employees. However, if you are running your own business, you will be responsible for paying your premiums. To assist in compensating for this huge expense, the CRA permits small business owners to remove a hundred percent of their health care premiums. This is in addition to the fact that certain medical premiums may be tax-deductible.

Business and home deductions

Operating your enterprise comes with several costs. For instance, running your business from your home may mean higher bills for telephone and electricity. Also, if you run the business from a different location, some other costs may arise such as furniture, computer equipment, office supplies, and travel expenses. To assist you to lower your taxable income as a business owner, you may deduct a part of your business expenses. Ensure that you keep the receipts and maintain a correct record while making available a valid proof of the expenses made in the business to the person preparing your tax to get some tax savings.

Income tax deductions

One thing about incorporating a small business is that when you do so, all business income will not be viewed as personal income or salary. Thus, instead of having to pay income tax on the money you earn, you will instead only pay it on the part of your income that you consider as salary. This would by extension lead to reasonable savings on taxes because income tax is equivalent to about 15 percent of the total amount that is earned per time. In summary, you will be saving good money on income tax deductions in the long run.

Losses incurred

In a situation where your company does not make money, you may simply make the deductions of the losses from the income tax. This can be quite helpful when you are in the early stages of your business. This is usually a time when the running costs are quite high and income may not suffice for the expenses been incurred per time. In summary, you will be able to lower your total tax liability just on this basis.

Tax relief for research and development

Research and development relief is a tax relief which can lower the tax bill of your company. This is often by an amount that is greater than the expenditure on allowable costs of research and development. On the other hand, if your company is medium-sized or small, you will be able to opt for a tax credit instead.

In the case of equipment lent to employees

Tax contributions are not payable on the inherent value of any equipment, office services, and consumables that may have been used by employees for a business. The conditions are that any private use of these facilities must not be significant and they must be used on the premises of the employer. In a situation where the benefit is provided elsewhere, the benefit must be used for official purposes alone. Also, private uses of the benefits must not be significant.

Some other deductions you can take advantage of to save money on tax

You may also lower your tax liability by simply writing off the mortgage interest every year. You will however not be able to write off your rent or mortgage payment if you are operating the business from outside your home. You can, however, deduct the amount you spend on mortgage interest as well as some other mortgage-related expenses. Also, by operating a home-based business, you will have access to the writing off of a part of the square footage of your premises. As a business owner, you can also benefit from several tax breaks which include employee pay, depreciation value of a car, and car mileage among others.

In conclusion, owning and operating your own business has the potential of making you a lot of money while also saving some in taxes. It is however important that you understand the dynamics behind taxes and leverage on the same. You should make it a point to check with your tax professional to have a better understanding of the advantages listed above concerning taxes for businesses.

Running your business in Canada can be a profitable venture especially if you abide by the rules governing taxation in the land. Also, understanding the dynamics of these rules should help you leverage the many benefits accruable to you.