May 23 2010
Best Toronto Income Tax Tips
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. Keep in mind that these steps are not unlawful nor illegal, you just happen to have found useful resources so lower down your expenses. After all, you are still going to pay your taxes except that now they are reduced.
Here are best tax tips for business owners who are unaware of how they can significantly lower their taxes.
1. Pay in Dividends
Not everyone knows that there is a certain advantage in being paid in dividends rather than salary. Provided that you do not have any other source of income, the first $38,000 of dividends is considered tax free in Toronto. Dividends have lower tax rate compared to that of salary. Consult your accountant; they would know best with this workaround.
2. Income Splitting
For business owners who has their spouses under their business payroll. You could assign your spouse to a lower tax bracket than where you are at. This will ensure you get more deductions.
3. Home Office
Business operating on a home office can get more tax deduction, by including house expenses on you tax deductions. These could range from property taxes, mortgage interest, and utility expenses. Of course understand the basic rule of proportioning your home office to your home so you know the total deduction applicable.
4. Shareholder loans
Shareholder loans are one of a good way to reduce your tax payments. If your business or corporation owes you debt, arrange debt repayment in a tax free basis. Shareholder loans are usually initial investments by the business owners or expenses paid by the owner in behalf of the business.
5. Tax Free Automobile Allowance
Corporate owned vehicles can be arranged so that your firm can provide a tax free automobile allowance for you. In Toronto, you are entitled to a tax free allowance starting at 52 cents per kilometer for the first 5,000 kilometers and 46 cents thereafter.
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