It’s that time of the year again! Tax season is here and small business owners are preparing for the dreaded paperwork. If you’re a small business owner, you know how important it is to make sure that you have all of your information in order when it comes to taxes. That includes deductions, capital cost allowance, and mileage rates. Don’t worry if this sounds overwhelming; we’ll break down all the details so you can get your taxes done quickly and efficiently.
If you use your car for business purposes, then you may be able to deduct mileage expenses on your tax return. The amount that can be deducted depends on the type of vehicle used, as well as the current federal rate for mileage reimbursement. To determine the amount of deductible miles driven, record all business-related trips and calculate the number of miles traveled per trip – then multiply by the applicable rate. Keep in mind that some states have different rates from those set by the federal government, so make sure to consult with a tax advisor for more information about specific rules in your area.
Capital Cost Allowance (CCA)
The CCA is an allowance that allows businesses to deduct a portion of their capital expenses from their taxable income each year. This can include expenses like equipment purchases or upgrades, vehicles, furniture, computers and office supplies. In order to claim CCA on these items, they must meet certain criteria set out by Canada Revenue Agency (CRA). For example, equipment must be necessary for day-to-day operations and last longer than one year in order to qualify for CCA deductions. Additionally, certain types of property are subject to depreciation over time—these items will require additional calculations in order to determine how much they will reduce taxable income each year. Again, consulting with a tax advisor can help ensure that all deductions are handled correctly come tax time.
Deductions & Credits
There are several other deductions available for small businesses on their taxes including GST/HST credit claims for employees or subcontractors hired during the year; home office deduction based on square footage used exclusively for work; medical/dental expense claims related only to employees or subcontractors; meals/entertainment expenses incurred while conducting business; travel-related expenses such as airfare or accommodations; insurance premiums related exclusively to business operations; lease payments on equipment used only for work purposes; charitable donations made solely by the business; and professional fees associated with hiring accountants or lawyers throughout the course of operations. Again consult with a tax advisor if unsure about any particular deduction or credit as there are often specific rules associated with these items which may limit their availability at tax time.
Tax season can be a stressful time but with proper preparation it doesn’t have to be! Being aware of available deductions such as mileage rates and capital cost allowances can save small business owners money come April 15th – but don’t forget about other credits and deductions too! Consulting an experienced accountant or tax advisor is always recommended when dealing with complex issues like these so if you’re feeling overwhelmed don’t hesitate to reach out for help today! With some research and preparation you’ll be ready before filing deadlines even arrive! Happy Tax Season everyone!