Navigating Holiday Tax Implications for Small Business Owners in Canada

Tax Deductible Items for Small Businesses

As a small business owner, there are several tax deductible items that you should keep in mind when preparing for the holidays. These can include business supplies, office desk necessities, and holiday gifts for employees or clients. Goods and services you can shop for your business over the holidays include: 

1. Business supplies: pens, pencils, paper, and computer software.
2. Office desk necessities: new desk lamp, filing cabinet, or chair.
3. Marketing and advertising expenses: website design, flyers, and promotional materials.
4. Legal and professional fees associated with setting up or maintaining the business.
5. Online subscriptions and memberships, such as graphic design tool subscriptions or business association memberships.
6. Travel for business purposes: airfare, hotel stays, and meals.
7. Training and education expenses associated with advancing the business.
8. Furniture and equipment associated with the business operations.

These goods can be purchased throughout the year, but it might be a good idea to stock up on them during the holiday season, especially if there are sales or discounts.

Small Business Tax Deductions for New Business Owners

For new business owners, there may be expenses specific to getting started or during the first year of operations. These deductions can be used to purchase items listed under startup expenses – items that a new business owner can purchase before the business officially begins operations. These can include the cost of registering the business, legal fees, and market research. Any expenses related to advertising and marketing, including website design, flyers, and promotional materials, are also tax deductible.

Tip: Remember, there’s a difference between current and capital expenses.

• Capital assets and current expenses differ in lifespan, expected benefits, and tax treatment.
• Capital assets are larger, long-term assets, providing significant benefits over several years, whereas current expenses are smaller, day-to-day expenses required for ongoing operations.
• Capital assets are depreciated over the years of use (Capital Cost Allowance Deduction), while deductible expenses can be claimed for the immediate tax year.

Holiday Gifts for Employees or Clients

Giving gifts to your employees or clients during the holidays is a great way to show your appreciation, but it can also be a tax write off. The CRA (Canada Revenue Agency) allows business owners to claim up to $500 per employee for non-cash gifts. However, it is important to note that cash gifts are not tax deductible. Consider these gifts for you staff or clients:

1. Food items: Gourmet chocolates, artisanal cookies or gourmet popcorn.
2. Gift cards: To a local restaurant, coffee shops, spa, or retail store.
3. Books: Business-related books or books on topics of interest.
4. Digital subscriptions: Magazine or news subscriptions or a streaming service subscription.
5. Desk items: Personalized calendars, mousepads with company logo or notepads.
6. Self-care items: Spa gift sets, candles or massages.
7. Specialty items: Custom-made jewelry, artwork or pottery.
8. Experience vouchers: Wine tasting, cooking classes or golf lessons.
9. Tech accessories: Custom phone cases, earbuds or laptop sleeves.

Tax Benefits of Business Donating to Charity

By donating to a registered charity, businesses are offered a tax credit that may reduce a tax liability. They are non-refundable though, so these will not create a refund, but may be carried forward up to five years if they are not needed in the current year. To qualify for tax benefits, businesses must donate to a registered charity recognized by the CRA.

This means that the charity has met certain requirements and is deemed eligible to receive donations from businesses. Additionally, the business without the expectation of receiving any goods or services in return.