Tips on Saving Tax Money with Your Home Business

One of the perks of starting a home based business in Canada is learning all the tips on saving tax money. One of the more obvious tips is deducting expenses for the business use of a work space in your home.

According to Canada Revenue Agency, you can take advantage of this deduction if your home work space is:

• your principal place of business...or
• you use the space only to earn your business income, and you use it on a regular and ongoing basis to meet your clients or customers.

Home Maintenance Tips on Saving Tax Money

Here are some of the expenses related to maintenance of your home that you can deduct a portion of:

• heating
• home insurance
• electricity
• cleaning materials
• property taxes
• mortgage interest

To calculate the portion you can deduct, take the area of the work space and divide it by the total area of your home.

Personal, Living and Travel Operating Expenses

In most cases, the general rule for personal and living expenses is that they cannot be deducted. However, travel expenses incurred while you carry on business away from home are deductible.

More Tips on Saving Tax Money: Meals and Entertainment

According to Canada Revenue Agency, the maximum part you can claim for food, beverages, and entertainment expenses is 50% of either the amount you incur or an amount that is reasonable in the circumstances, whichever is less.

Vehicle Expenses

If you use a vehicle for both business and personal use, you can deduct only the portion of the expenses that relates to earning income and be sure to keep a record of your travel.
For each business trip, keep records of the following:

• the date
• destination
• purpose of trip
• number of kilometres

Keep in mind you can deduct motor vehicle expenses only when they are reasonable and you have receipts to support them. Be sure to write down the odometer reading of each vehicle at the start and end of the year.

Vehicle expenses that you can deduct:

• fuel and oil;
• maintenance and repairs;
• insurance;
• licence and registration fees;
• capital cost allowance;
• interest you pay on a loan used to buy the motor vehicle
• leasing costs

Other Deductible Expenses

Here are a number of important other deductible expenses

• accounting fees
• legal fees
• Advertising (certain restrictions apply)
• office expenses – small items only (no capital items)
• Business tax, fees, licenses and dues
• insurance premiums on any building or equipment used for business
• interest and bank charges on money you borrow to run your business
• salaries to employees, including employer’s contributions

As you can see, there are many tips on saving tax money when starting a home based business in Canada. For complete and up-to-date details, be sure to consult the Canada Revenue Agency website: Click Here

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