Operating a business can be challenging! From marketing and advertising to regulatory compliance, many details require attention to ensure a firm’s success. Taxes have a significant impact on profitability and long-term sustainability, so effective tax planning is critical.
What Is Effective Tax Planning?
Effective tax planning involves analysis, optimization, and compliance to reduce tax liabilities and maximize tax credits and incentives. It’s a comprehensive approach that produces advantages that assist with sustainability and profitability. Constantly evolving tax regulations and laws make effective tax planning critical for long-term success.
Commonly Overlooked Business Tax Credits
Many companies miss key tax deductions due to poor bookkeeping or lack of awareness. The following are some of the deductions/credits most commonly missed.
- Claiming what you pay: Employee benefits, wages, and salaries are a substantial business expense. Reasonable costs of salaries/benefits paid to family members working for the company are deductible. To ensure the legality of this deduction, keep accurate records.
- Prepaid expenses (rent, insurance, subscription services, etc.) are deductible. Thorough tracking is essential.
- Legal and accounting fees (tax preparation, legal consultation, accounting services, etc.) are deductible. Ensure related invoices are logged appropriately.
- Vehicle expenses (repairs, fuel, insurance, etc.) incurred by vehicles used for business are part of a company’s operating costs. They are deductible based on the percentage of personal versus business use. To make this claim, keep a logbook of business travel, ensuring accurate mileage is reported.
- Creating apprentice jobs may result in up to $2,000 in tax credits, helping you lower your business’s tax bill.
- Business licenses and fees (such as memberships to trade or professional organizations) are deductible as business expenses. Ensure you have documentation proving membership.
- HST/GST payments on goods and services (ride-share services, parking costs, reimbursed expenses, etc.) qualify as input tax credits. To claim this deduction, keep complete and accurate records.
- Promotion and advertising (radio ads, free samples, social media ads, newspaper ads, donated services, etc.) are deductible.
- Research and development credits are available to trusts, individuals, corporations, and sole proprietors. Businesses may claim a deduction against earned income and earn an investment tax credit.
- Educational expenses associated with training or continued education related to the business (seminars, online courses, workshops, etc.) are deductible.
- Depreciation of intangible business assets (copyrights, patents, software, etc.) is often overlooked but qualifies for depreciation deductions.
- Clean investment tax credits (introduced in the 2023 federal budget) stimulate investment in clean technology and energy. They include the Clean Hydrogen Investment Tax Credit, the Clean Technology Investment Tax Credit, and the Clean Electricity Investment Tax Credit. They offer refundable benefits, making them attractive for new investments.
Do you need help maximizing business tax credits? Cook and Company provides high-quality tax planning and advisory services. Depend upon our Chartered Professional Accountants for help finding the tax credits for which your company qualifies. Contact us for assistance.
