The clock is ticking for small business owners looking to take advantage of year-end tax savings.
“Small business owners have some unique tax-saving strategies they can employ toward the end of the year to help boost their overall savings for 2010,” said Jamie Golombek, CIBC’s managing director of tax and estate planning.
December, for example, is the most advantageous time from a tax perspective to make purchases of any new business assets for self-employed or small business owners.
Under Canadian tax rules, businesses are generally permitted to deduct under the “half-year rule,” or half of a full year’s tax depreciation in 2010, even if the asset was purchased on New Year’s Eve.
For computer equipment purchased before February 2011, you can write off 100% of the cost in the year of acquisition, without the half-year rule.
He also noted incorporated business owners may wish to review their annual compensation mix for the year. From a tax perspective, it may make more sense for owners to pay themselves exclusively through dividends rather than a salary in 2010. While that would prevent them from making an RRSP contribution, since dividends are not considered earned income, they may be better off saving money inside their corporation than inside an RRSP.
“To make sure tax planning for your business stays a priority all year long, it’s important for small business owners to review these and other strategies with an adviser on a regular basis,” said Golombek.
“Discussing your tax situation with a professional can help you ensure you are taking advantage of all the available tax minimization strategies.”