Tax Saving Tips for Small Business

As the fiscal and tax year draws to a close, it's important to review your business tax situation to see what you can do yet to minimize the income tax you'll have to pay. Use these six year end small business tax saving tips to implement tax-saving strategies before the New Year.

• Tax Tip # 1: Maximize your Capital Cost Allowance claim. It is a good idea to purchase necessary equipment and technology now rather than waiting for the new tax year to start. Although you'll only be able to claim 50 percent of the normally allowable Capital Cost Allowance on your new assets, you'll still be increasing your Capital Cost Allowance for this tax year – and setting yourself up for an increased CCA claim in the following tax year.


• Tax Tip # 2: Delay disposing of depreciable assets. If you're planning to dispose of depreciable assets, such as manufacturing equipment or computer equipment, don't dispose of them until the new year. Otherwise, you'll be reducing your Capital Cost Allowance Claim for this tax year.


• Tax Tip # 3: Delay or defer income. Any income your business receives in January rather than December will reduce your business income for this year – thereby reducing the tax on your income. Delaying or deferring income makes especially sound tax sense when your business income is higher than usual, or when the tax rates in the coming year are going to be lower.


• Tax Tip # 4: Increase business expenses. Another way of "managing" your income for the year is to increase your business expenses. Think about your upcoming needs for products or services and fill them now. Review the categories of potential business expenses, and see if your expenses are "low" in any one area. It's certainly never too late, for instance, to do some more advertising or promotion for your business.


• Tax Tip # 5: Make your maximum RRSP contribution. This is the best available tax deduction for any business set up as a sole proprietorship or partnership. In any given year, you can contribute up to 18 percent of your earned income, and your RRSP contribution is deducted directly from your income. If you don't have an RRSP, there's no time like the present to set one up. If you aren't sure what the maximum limits are this year, click here.


• Tax Tip # 6: Maintain your calendar year reserve. Thinking of winding down your business operations? Rather than closing down your business before the end of this year, wait until next year, so the remaining portion of your calendar year won't be taxed until the following year. That's right; staying in operation for a few more weeks will defer this income inclusion for a year.

Unfortunately, we can't avoid taxes, but it is wise business practice to minimize the income tax payable. Putting these six tax tips into effect during the waning weeks of the tax year will help you reduce your income taxes and get a jump on next year's tax planning.

AIS provides tax services for individuals, small business and sole proprietorships. You have your business goals....we have solutions and ideas. Let's talk.

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