Seven benefits small business owners in Canada often miss

In my years as a bookkeeper, I rarely saw small business owners do anything dramatically wrong at tax time. What I saw far more often was money left on the table: claims they were entitled to but didn’t make, programs they had never heard of, and simpler methods they didn’t know they could use.

Here are seven that came up again and again. Most apply to sole proprietors and the self-employed; a few apply to incorporated businesses as well. Eligibility rules, rates and thresholds change, so use this list as a prompt to check, not a guarantee that you qualify.

Sales tax: two easy wins

1. GST/HST input tax credits. If you are registered for GST/HST, you can generally claim back the GST/HST you paid on purchases used in your business, through input tax credits. That includes things like equipment, software, supplies and a business share of phone and internet. People who register only because they passed the $30,000 small supplier threshold sometimes forget to claim them, which means paying tax on their costs for no reason. Keep receipts that show the supplier’s GST/HST number.

If you are below the threshold, registering voluntarily can still make sense in some cases, particularly if your clients are mostly businesses that can claim back the tax you charge them. It also adds filing obligations, so weigh it carefully.

2. The Quick Method of accounting. Many small businesses with annual taxable supplies (including those of associated businesses) of $400,000 or less can elect to use the Quick Method. Instead of tracking every input tax credit, you remit a set percentage of the GST/HST-included sales you make, and you keep the difference. For service businesses with low costs, it can mean less paperwork and, in some cases, less tax to remit. Not every business is eligible, and the remittance rates depend on your province and the type of business.

Expenses you might be underclaiming

3. Business-use-of-home expenses. If you are self-employed and your home is your principal place of business, or you use a dedicated space regularly to meet clients, you may be able to deduct a portion of your home costs. For renters, that can include a share of rent, utilities and tenant insurance. As an illustration, if your workspace is 10 per cent of your apartment and your annual rent is $24,000, the rent portion alone would be $2,400. This claim generally can’t create or increase a business loss, but unused amounts can be carried forward.

4. Vehicle expenses, with a simpler logbook. If you use your vehicle for business, you can deduct the business share of costs like fuel, insurance, maintenance and capital cost allowance. Many people skip this because keeping a full logbook all year sounds tedious. The CRA allows a simplified approach: once you have kept a full logbook for a complete year as a base year, you can in later years keep a log for a sample period of at least three continuous months and use it to estimate the business share for the year, provided your usage is broadly similar.

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The deductions people miss aren’t the exotic ones. They are the ordinary ones that seemed like too much paperwork.

Benefits that come with being self-employed

5. The deduction for your CPP contributions. If you are self-employed, you pay both the employee and employer portions of Canada Pension Plan contributions (or Quebec Pension Plan contributions in Quebec). Self-employed people can deduct the employer-equivalent portion from their income and claim a credit for the rest. Tax software usually handles this automatically, but it is worth checking that it was applied, especially if you file on paper.

6. EI special benefits for the self-employed. Self-employed Canadians can opt in to Employment Insurance special benefits, which include maternity, parental, sickness and caregiving benefits. It doesn’t cover regular benefits for lack of work. You register through the federal government, pay premiums on your self-employment earnings, and generally must wait 12 months from registration before you can claim. Because of that waiting period, it’s worth looking at well before you might need it. Quebec residents receive maternity and parental benefits through the Quebec Parental Insurance Plan instead, but may still opt in for sickness and caregiving benefits.

Help with financing

7. The Canada Small Business Financing Program. This federal program shares the risk of certain small business loans with participating lenders, which can make it easier for a small business to borrow for things like equipment, leasehold improvements and some other assets. You apply through a participating bank or credit union, not through the government. Eligibility, loan limits and the types of costs covered are set by the program and have changed over time, so ask your lender for the current details.

Beyond federal programs, provinces, territories and some municipalities run their own grants, loans and wage subsidies, often aimed at specific industries, regions or groups such as young entrepreneurs. These change often, so check your provincial government’s small business resources each year.

Keeping it all straight