- Personal Finance
Taxes and a Canadian Proprietorship
As a home based proprietorship, you are in an enviable position when it comes to income tax as you are eligible for many deductions that others are not.
There are some advantages to being a home based proprietorship and one of these comes at tax time as you are able to file your business taxes together with your personal ones. While your business taxes cannot help you get a personal refund, there are some things that you can deduct that a corporation cannot bringing your tax liability to 0.
Mortgage – If you run a home based proprietorship, you are able to deduct a portion of your mortgage and your property taxes on your taxes. You need to figure out what portion of your home is used exclusively for your business up to a certain percent and that can be used to help bring down your business income. This only applies if this is the principle place of business for you.
Utilities – Another great benefit of a home based business is that you are able to deduct a portion of your utilities expenses, at the same rate you are using for your mortgage. This can end up making quite a difference on your taxes at the end of the day.
Mileage – Make sure to track every time you head somewhere for your business. Whether you are going to the bank, the office supply store or to meet a client, you can use the mileage on your taxes.
Repair Bills for Vehicle – If you take your vehicle in for any type of servicing, these bills are deductible on your taxes. You can write off the portion that relates to the business mileage. For instance, if 30% of the mileage on your vehicle is business related, you can then write off 30% of the repair bills on your vehicle.
Meals/Entertainment – When meeting clients for coffee or a meal where you pay the bill, make sure to keep it and you can deduct it when it comes to taxes. It is only a 50% deduction, but every little bit counts and helps you out at the end of the day.
If this all sounds complicated, it is best to use a software program that will take you step by step through the process or to go to a company that will do your taxes for you. Make sure to have all your book s or receipts organized to make their job easier.
Canada Revenue Agency
- Business expenses
A list of deductible business expenses as well as their explanation for use on Form T2125.