When you understand how to maximize self-employment and small business deductions, it helps you lower your taxable income, which in turn reduces the amount of tax you must pay at the end of the year. Filing your taxes correctly means reviewing your expenses to make sure you can deduct them.
In many cases, you can deduct interest payments on credit cards and loans taken out for business, provided the payments meet the Canada Revenue Agency’s criteria.
To ensure you include all payments in your calculations, you want to track your expenses throughout the year on a spreadsheet or with accounting software such as QuickBooks Online, which works equally well for freelancers, contractors, and small business owners.
Every time you pay a bill, record both the principal and the interest amount in the ledger. At the end of the year, tally up the amounts to enter them into your tax returns. This also helps you from forgetting anything at tax time.
In most cases, the money you pay out to generate income goes down in your books as business expenses. Possible deductions include:
If you purchase a vehicle solely for professional use, you can, of course, deduct both the interest and payments on your taxes. In cases where you use that vehicle for both professional and personal use, you can still typically deduct part of the payment and interest at tax time so long as you keep clear mileage records that support your business use.
By keeping personal expenses and business expenses separate, maintaining excellent records throughout the year, and following all the CRA’s guidelines, you can take a deduction at tax time for the interest you pay on business-related expenses.
QuickBooks helps you manage and organize your finances, which makes tax time less stressful and more productive. QuickBooks Online can also help you maximize your tax deductions. Keep more of what you earn today.
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