If you’re in business, you’re likely managing a dozen tasks before lunch. Taxes frequently fall into the ‘I’ll deal with that later’ category when managing your staff, satisfying your customers, and expanding your business. This is completely reasonable.
With so many moving components, it’s simple to stick to the fundamentals and ignore deductions that could result in significant savings until ‘later’ comes tax season. However, not claiming these deductions could mean you’re paying more taxes than necessary, which could have been invested back into your business.
We can attest that even the most well-run companies frequently overlook deductions they were unaware of or unsure how to claim correctly. Let’s make that change. Here is a comprehensive guide to the most commonly overlooked deductions; it is straightforward, easy to understand, and can help you retain more money in your company where it belongs. You can now navigate the complex world of tax deductions with confidence.
An Overview of Business Tax Deductions
Expenses that are ‘ordinary and necessary’ for the business are considered deductible by the Internal Revenue Service (IRS). Naturally, the government provides a plethora of regulations regarding deductible expenses to support that vague statement.
5 Tax Deductions Every London, Ontario Business Owner Overlooks
1. Costs of the Home Office
If you work from home, even part-time, you could deduct some of your rent, utilities, internet, insurance, and other expenses. The space occupied by your home office and whether it is used solely for work determine how much you can typically claim.
For instance, you can deduct 10% of qualified home-related expenses if your office occupies 10% of your house. The thorough way is frequently more beneficial if you have a designated place routinely used for the company.
2. Car Expenses
If you use your vehicle for business-related tasks, meetings, or deliveries, you can write off some of its expenses, such as petrol, insurance, maintenance, and depreciation. Tracking is crucial in this situation. The agencies want to know how much of your driving is for work-related purposes.
It is simple to do this with a logbook, even a digital one. Assuming that 5,000 of your 20,000 km of driving in a year were for work, you might deduct 25% of your allowable expenditures. Remember that supporting your claim in a review is difficult without a logbook or mileage tracker.
3. Allowable Meal Costs
If you frequently have lunch at work, you may be eligible to claim 50% of your meal expenses as a deduction. Consider holding meetings over lunch with business associates, partners, or staff. You can write off 50% of the cost of meals you eat while doing business, provided the charges are reasonable.
To optimize this deduction, it’s crucial to keep thorough records of the meal’s date, location, guests, and business purpose. Accounting software or an accountant London, Ontario, can make it easier to keep track of these costs and guarantee that you are recording all of your deductible meal expenditures. Keep your receipts handy if the agency asks about your lunch expense deductions.
4. Internet and Mobile Phone
Many small business entrepreneurs use their internet and phone services for work and play. Only a fraction of these expenses are business-related, and the rest are deductible. To claim this deduction, you must calculate the portion of use for business purposes and apply that proportion to your overall bill.
For example, you can claim 60% of your mobile bill as a business expense if you use your phone 60% for work-related purposes. Likewise, figure out the percentage of internet usage related to business and subtract that amount.
Maintaining records of conversations and internet usage for work purposes can assist in proving this deduction. Additionally, you can maximize the deduction and provide more precise documentation by using different devices or services for business and personal use.
5. Marketing & Promotion
Most marketing expenses, including
- digital advertising campaigns,
- flyers,
- trade show booths,
- business cards,
- and social media management,
are deductible if they contribute to the expansion of your company. Depending on their structure, even the expenses incurred when creating or updating a website may occasionally be deductible. Although the tax treatment may differ slightly if you work with foreign consultants or ad platforms, the base cost is frequently deductible.
Conclusion
We would all want a lower tax burden, wouldn’t we? It’s crucial to know about frequently disregarded deductions that could help you achieve that. The secret to ensuring you don’t lose out on any deductions is to keep track of all your costs.
To avoid costly errors, take the time to verify whether expenses are eligible. By maintaining thorough records, you can take control of your tax situation and ensure you’re not missing out on any potential savings.
Regular changes to tax regulations could result in missed opportunities for significant deductions. For this reason, seeking the advice of a personal tax accountant can help you maximize your tax savings while maintaining compliance. Stay alert and proactive to ensure you’re not missing out on any potential savings.
