2017-03-08 00:00:00 Taxes English Claim deductions from business interest on loans to reduce your tax burden. Understand which payments qualify before you file. https://d1bkf7psx818ah.cloudfront.net/wp-content/uploads/2017/06/08214121/Small-business-owner-reviews-loan-interest-on-laptop-sitting-at-desk-in-home-office.jpg Write Off Loan Interest as a Business Expense

Write Off Loan Interest as a Business Expense

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Understanding how to maximize self-employment deductions helps lower your taxable income to reduce the amount taxed at the end of the year. To avoid conflict with the Canada Revenue Agency, it’s important to review what expenses are deductible. In many cases, interest payments on credit cards and loans taken out for business are all deductible provided the payments meet the CRA’s criteria. To ensure you include all payments in your configurations, you want to track your expenses throughout the year on a spreadsheet or using accounting software for independent contractors. 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. Expenses paid out to generate income are considered business expenses. This includes any money borrowed to help generate income. Deductible interest payments include student loans used for certificate programs in your industry and degrees used to get ahead. Credit card interest is also deductible provided the money was used for purchasing inventory, paying bills, or even entertaining customers. You can also deduct the interest paid on an automobile loan provided the vehicle is used solely for business. In some cases, a portion of the interest can be used if the vehicle is used for both business and pleasure. You can reduce your business taxes by keeping personal expenses and business expenses separate, and by maintaining excellent records throughout the year. Keep separate files and review the CRA guidelines on self-employment taxes.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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