We’ve entered the second half of the business tax year. Are you wondering how you can ensure tax savings for your company? Strategic tax planning is the answer. You can reduce tax liabilities and enhance savings by claiming available tax credits, income-splitting, utilizing small business deductions, making dividend payments to family members, creating a structured plan for business expenses/earnings, or implementing income deferral strategies. Read on to learn more.
Strategies for Reducing Tax Liabilities and Enhancing Savings
Following are several effective strategies for reducing the tax your business pays.
- Income splitting minimizes tax liability while remaining within tax laws and regulations. It may involve allocating income to a family member(s) (children, spouse) in a lower tax bracket by paying reasonable salaries for work done for the business. Dividends issued to family member(s) who are shareholders is another possible strategy. A family trust can also distribute income to beneficiaries.
- Claiming available tax credits is another critical aspect of business tax planning. Companies with foreign source income can claim foreign tax credit relief to prevent double taxation. A corporation can receive a tax credit on eligible research and development expenditures. Other strategies include depreciating capital assets, claiming business expenses (salaries, rent, supplies, etc.), and utilizing investment tax credits.
- Taking advantage of capital cost allowance enables corporations to deduct the cost of depreciable assets over time, reducing taxable income. One strategy is to purchase assets early in the fiscal year. Immediate expensing offers the chance to substantially reduce taxable income while claiming non-capital losses also reduces taxes.
- Optimizing corporate structure for tax purposes is another possible strategy. Each business must choose the appropriate legal entity for its purpose, needs, and goals (sole proprietorship, partnership, corporation).
- Establishing a holding company is an efficient tax deferral technique. The holding company acts as a separate entity that owns/controls shares. Dividend income received by the holding company is usually tax-free.
Why Should a Business Seek Professional Help With Tax Planning?
A chartered, professional accountant can help with corporate tax planning and strategy. Utilize their services to:
- maintain accurate financial records
- ensure compliant/advantageous corporate tax planning
- stay up to date on changes in tax laws
- ensure accurate, timely filing of business tax returns/documents
- reduce tax liabilities
- enhance savings
- help navigate complex tax planning
Need help with corporate tax planning? Not sure what tax deductions your business can claim? Cook and Company’s team of CPAs provides corporate tax advice that is powerful, approachable, and reliable. Contact us for high-quality tax services.
