As an independent IT consultant, you are intimately familiar with how much it costs to operate your business and often, it seems like the CRA isn’t helping to keep your costs manageable. Since the CRA won’t be going away anytime soon, keep the following tax planning strategies in mind to ensure your tax bill is as low as possible next year. While all of these tips are easy enough to do by yourself, we recommend hiring an accountant for IT consulting professionals to make sure that you get every tax break your business is entitled to each year.
According to the CRA, you can deduct any reasonable current expense you paid or will have to pay to earn business income. There are a number of tax deductible expenses that independent contractors can write off, including:
- Your vehicle – You can write off, at least partially, your costs for fuel, parking, and regular maintenance like oil changes, any necessary repairs, highway tolls and insurance. The amount you can write off depends on how much you use your car for work. If you use your car 75 percent of the time for work-related trips, then you can write off 75 percent of these expenses. Be sure to keep track of work related travel so you can accurately take advantage of everything that you’re legally entitled to deduct.
- Travel – You can legitimately deduct the cost of hotel accommodation and public transportation fares when you travel for business, and 50 percent of what you spend on food and entertainment.
- Supplies – You can deduct the cost of items your business uses indirectly to provide goods or services (for example, drugs and medication used in a veterinary operation, or cleaning supplies used by a plumber).
- Professional services – The CRA lets you deduct accounting and legal fees you incur to get advice and help with keeping your records. You can also deduct fees you incur for preparing and filing your income tax and GST/HST returns.
- Some computer and software expenses – If you lease computers, cell phones, fax machines and similar equipment, you can deduct the percentage of the lease costs that reasonably relates to earning your business income.
These are just a few of the ways you can save money and reduce your tax liability as an independent IT contractor.
For more information about ways to save money as a small business owner, give one of our experienced CPAs a call today at 800-465-7532 or contact us online.