Have you ever wondered why some of your friends, neighbours and co-workers always seem to be doing better than you? You know, they have the newer vehicle, take holidays to warmer climates in the winter and always have the latest electronic gizmo. More often than you realize, it’s because the pay less taxes than you do.
Let’s be perfectly honest here: Nobody actually enjoys paying taxes despite the fact that most of us have come to accept a certain amount as necessary in our modern society. The problem is the disconnection between paying taxes (work and shopping) and the benefits (education and health care). Without a positive feedback loop it is too easy to feel the pain on payday, but overlook the joy when driving past a school or hospital. So, when we see examples of self-serving politicians and un-civil servants in action, we get understandably upset.
The logical taxpayer response to the excesses and waste of modern-day BIG GOVERNMENT is utilize every legal tax saving opportunity available to you. One of the best methods for reducing your tax bill is to have your own home-based business. Here in Surrey, BC, there are over 7,000 home-based businesses accounting for approximately 50% of the total number of businesses here. That works out to over 5% of all households who have figured out the importance of keeping more of their income to meet their expenses.
Some common misperceptions surround the issues of having a home based business. Probably the biggest of these has to do with the notion that you cannot deduct more in expenses than you make from your business. In fact, if you look over your T1 tax return, you’ll see that there are 2 separate sections dealing with Income and Deductions. Under the income section, all your sources of earnings are consolidated together. Meanwhile, all your Deductions (including those of your home business) are used to reduce the total tax payable.
YOUR LEGITIMATE BUSINESS EXPENSES MAY BE USED TO REDUCE THE TAX PAYABLE ON YOUR EMPLOYMENT INCOME, EVEN IF THESE EXPENSES EXCEED YOUR BUSINESS INCOME.
Yes, you read that correctly. Your home business expenses are not tied to your home business income. Thus, your expenses may be used to reduce the amount of taxes paid on your employment income. Just how much in business expenses may be claimed? Here are just a few of the many examples:
1. One room of your residence may be claimed for office use, even if other activities take place in that room. If you happen to have a 4 room apartment (not including bathrooms or closets) then your can claim 25% of your expense for rent or mortgage, utilities, property taxes, insurance and so forth.
2. If you use your vehicle for your business, including trips to pick up office supplies, get gas, drop off mail, or any business-related activity whatsoever along your itinerary, the entire trip may be claimed as business expense. This is the case even if you make several other stops along the way in addition to you business purpose. Some people have legitimately claimed over 75% of their total vehicle expenses including lease, insurance, gas, licenses and tolls.
3. If you attend a meeting or take a trip, even if the entire event is not 100% dedicated to business, you can still claim a deduction. If your spouse happens to be a business partner, then even a dinner date can become a business meeting so long as business is being discussed. As for that trip to Hawaii you have planned, a simple visit with a potential supplier, a potential customer, or even to do research makes it a legitimate business expense.
4. Having a home business means doing a lot of extra work in order to earn substantial amounts of income before you can legitimately be considered to be in business. Nothing could be further from the truth.
THE MINUTE YOU SIGN UP TO BECOME AS FROGWASH DISTRIBUTOR, AFFLIATE,OR AGENT, YOU ARE CONSIDERED TO BE IN BUSINESS AND ELIGIBLE TO CLAIM ALL THESE EXPENSES.
In fact, you can start benefitting from having a home based business even before you get your G.S.T. number or a Business License.
5. Another big misperception is that having a home based business and obtaining all the tax-saving benefits from your many expenses is either a lot of effort, or a lot of boring paperwork, or both. In fact, with our simple system you won’t have to do hardly a thing as our support network will handle all the mundane tasks. All you have to do is follow a few simple steps and thousands of dollars in legitimate tax deductions will be yours.
6. Finally, the last big misperception has to do with raising the ire of the CRA for claiming a lot of your expenses for business purposes. The fact is, the tax laws were written with folks like you in mind as a way of encouraging entrepreneurship among Canadians who are notoriously un-enterprising. They know that 95% of the public can’t be bothered to make the effort to start their own business, no matter how may thousands of dollars it will increase their income tax refund every year.
Stop sending your money to Ottawa to finance the latest submarine fiasco or Senate scandal. You work hard for your money. As my good friend, Dalton Green of Green Financial is fond of saying, “It’s not how much you make, but how much you keep that counts.”