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If you're a business owner, you're probably tired of paying too much in tax. However, there are tax strategies available to minimize the amount of tax that you pay. 5 Best Tax Tips by a Toronto Chartered Accountant: 1. Paying Dividends - Tax Tip Dividends have a lower tax rate than salary. For example, the highest personal income tax rate in Toronto, Ontario is 46.4% for salary and only 31% for dividends. In fact, the first $38,000 of dividends are tax free in Toronto, Ontario, providing that you have no other source of income. Therefore, it's more advantageous for your corporation to pay you dividends instead of salary. You should consult your Chartered Accountant in Toronto first, before you implement this strategy. 2. Income Splitting - Tax Tip If your spouse is involved in your business, you could pay him/her a reasonable salary for the work that he/she has performed. If you are in a high tax bracket, and your spouse is in a lower tax bracket, then your overall tax burden will be less by paying your spouse a salary. 3. Home Office - Tax Tip As a sole proprietor that has a home based office, you can write-off a portion of the costs of running your home. These costs include utilities, property taxes, mortgage interest and maintenance. The portion that you can write-off is the based on the proportion of the size of your home office of total the total size of your home. For example, if your home office comprises 10% of the total space in your home, then you can write-off 10% of the costs for running your home. Before undertaking this strategy, you should speak with your Toronto Chartered Accountant first. 4. Shareholder loans - Tax Tip If your corporation has a debt that it owes to you, you can have your corporation repay that debt to you on a tax free basis. Shareholder loans often arise from the initial capital invested by the business owner or because of expenses paid on behalf of the corporation by the business owner.
If your Chartered Accountant in Toronto hasn't told you about shareholder loans, then you should definitely ask why. 5. Tax-Free Automobile Allowance - Tax Tip If you have a corporately owned automobile, consider having your corporation pay you a tax-free automobile allowance for the KM's that you drive for business purposes. In Toronto, Ontario, you can receive a tax-free automobile allowance of 52 cents per KM for the first 5,000 KM and 46 cents thereafter. In addition, the automobile allowance paid to you is tax deductible by your corporation. Again, please speak with your Chartered Accountant in Toronto first, before paying an automobile allowance to yourself.
Allan Madan is the owner of Madan Chartered Accountant. He is a Tax Expert & Chartered Accountant in Toronto & Mississauga. As a Chartered Accountant in Toronto, Allan provides advice to employees and corporations. In addition, Allan is also a small business accountant in Toronto that helps entrepreneurs. For more tax tips please visit http://madanca.com/blog. To learn more about Allan Madan (Chartered Accountant in Toronto & Mississauga), please visit his website http://madanca.com
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