Insights
Insights
Running a small business in the Greater Toronto Area (GTA) comes with many responsibilities—managing finances, growing your customer base, and of course, staying tax-compliant. Tax laws can be tricky, especially for new businesses, and a few smart strategies can make a big difference in your overall tax liability. Here are some practical tax tips to help Toronto-based small businesses maximize deductions and avoid common tax pitfalls.
Starting a business can require significant investment. The good news is that the Canada Revenue Agency (CRA) allows you to deduct a portion of start-up costs. Expenses like legal fees, equipment, and initial marketing efforts can be eligible. Keep a detailed record of these expenses, and work with your accountant to maximize this deduction.
In Ontario, small businesses must understand when and how to charge GST/HST. If your business earns more than $30,000 in gross revenue over a year, you’re required to register for and charge HST. Ensure you're tracking sales accurately, and remember to set aside collected HST, as you’ll need to remit it to the government.
Many small businesses in Toronto are home-based, especially in today’s remote-first work environment. If you use part of your home exclusively for business purposes, you can claim a portion of your home expenses, such as rent, utilities, and even maintenance costs. This deduction is proportional to the percentage of your home used for business.
For businesses that require travel within the GTA, keep accurate logs of mileage, tolls, and gas expenses. The CRA allows you to deduct vehicle expenses if they are used for business purposes, but it’s essential to maintain detailed records. Remember, only the business-use portion of your vehicle expenses is deductible.
In our digital age, technology is essential for running a competitive business. Computers, software, phones, and other tech equipment that are essential to your business may be eligible for deductions. Track your tech-related expenses carefully, as these costs can add up quickly.
If your small business is expanding, consider incorporating to take advantage of the lower corporate tax rate in Ontario. Corporate tax rates can be significantly lower than personal income tax rates, allowing you to retain more of your profits within the business. Additionally, incorporation can offer limited liability, protecting your personal assets.
If family members help with your business, consider hiring them and paying a fair wage. This can reduce your business's taxable income while keeping money within the family. However, be cautious—ensure the wage is reasonable for the work done, as the CRA scrutinizes these arrangements.
For businesses purchasing long-term assets, like equipment or vehicles, the Capital Cost Allowance (CCA) allows you to deduct a portion of the asset's cost each year. This can help lower your taxable income, but it’s crucial to follow CRA’s rules on asset classification and depreciation rates.
Filing deadlines for taxes vary depending on your business structure. Self-employed individuals have until June 15 to file, while corporations have six months after their fiscal year-end. Missing a deadline can lead to penalties, so mark your calendar and work with your accountant to ensure timely submissions.
Tax laws can change frequently, and some deductions or credits may be unique to Ontario. An accountant familiar with the Toronto and GTA business landscape can provide valuable guidance and ensure your business remains compliant while taking advantage of all available tax-saving strategies.
Smart tax strategies are essential for small businesses in the GTA—every deduction and credit helps fuel your growth and keeps more money in your business.
For help with your taxes, get in touch with our team for a free consultation.