10 Practical Tax Tips for Canadian Small Business Owners
Starting a business is exciting—but when tax season rolls around, it can get overwhelming. Whether you’re a freelancer, contractor, or small business owner, managing your taxes properly can save you time, money, and headaches. Below are 10 practical tax tips to help Canadian entrepreneurs stay on top of their finances and stay compliant with the CRA.
1. Separate Personal and Business Finances
The first step to staying organized is to open a separate bank account for your business. It makes tracking income and expenses much easier—and it’s something the CRA appreciates when reviewing your records.
2. Track Every Expense (Even That Coffee)
Keep a record of every business-related purchase. Whether it’s a new printer, online subscription, or lunch meeting—track and categorize it. Save your receipts, or better yet, use accounting apps to automate the process.
3. Deduct Home Office Expenses
If you’re working from home, you may be able to deduct a portion of your:
- Rent or mortgage interest
- Utilities
- Internet
- Home insurance
- Property taxes
You’ll need to calculate the percentage of your home used for business.
4. Register for a GST/HST Number Early
Once your total revenue hits $30,000 in any 12-month period, you are required to register for a GST/HST number. Even before that threshold, voluntary registration allows you to claim input tax credits on business purchases.
5. Claim Capital Cost Allowance (CCA)
Business assets like laptops, phones, or furniture lose value over time. The CRA allows you to deduct a portion of that cost each year through CCA, helping reduce your taxable income.
6. Pay Yourself Strategically
There are two main ways to pay yourself:
- Salary (deductible to the corporation; builds CPP and RRSP room)
- Dividends (less paperwork; taxed at a lower rate but no CPP)
Choosing the right one depends on your income goals and tax strategy.
7. Use Accounting Software or a Bookkeeper
Don’t try to manage everything in a spreadsheet. Use tools like QuickBooks, Wave, or Xero to automate invoices, track income/expenses, and run reports. It saves you hours and improves accuracy.
8. Know What You Can Deduct
Common business deductions in Canada include:
- Office supplies
- Business meals (50%)
- Travel
- Advertising and marketing
- Legal/accounting fees
- Software subscriptions
When in doubt, ask: Is this expense reasonable and directly related to earning business income?
9. Make Quarterly Tax Instalments
If you owed $3,000 or more in taxes last year, CRA expects you to make quarterly instalments this year. Missing them can result in interest charges—even if you file on time.
10. File On Time, Even If You Can’t Pay
Always file your tax return by the deadline. If you’re self-employed, that’s June 15, but if you owe money, interest starts accumulating after April 30. Filing late adds a 5% penalty on top of what you owe.
✨ Final Thoughts
Taxes don’t have to be intimidating. With a little organization and the right tools, you can confidently manage your business finances—and keep more of what you earn. Subscribe for more actionable tips tailored to Canadian business owners.