3 tax credits new business owners can't afford to miss

November 14, 2014

Tax refunds and credits can make the difference between being in the red at the end of the fiscal year and ending up in the black. These are some of the important tax refunds and credits business owners should be aware of.

3 tax credits new business owners can't afford to miss

You spend a lot of money getting a business off the ground, and knowing important Canadian tax refunds and credits for new business owners can help offset these costs.

  • Canada encourages businesses to set down roots in the country whether they're run by domestic owners or non-Canadians.
  • Tax refunds and credits create a favourable environment for businesses, from home-based businesses to large corporations.

1. Research and development (R&D) tax credits

The Scientific Research and Experimental Development tax credit program, also known as SR&D, helps offset costs associated with research and development expenses incurred by your business.

  • When you take this credit, 35 per cent of your R&D costs, up to $3 million, is considered for a tax credit.
  • If your business has expenses that go beyond $3 million, you receive 20 per cent for any amounts above the $3 million mark.
  • The most significant aspect of this tax credit is that it is provided as a refund.

2. Investment tax credits

Canada also supports investing money back into your business. Investment tax credits apply to corporations, sole proprietorship and partnerships and are used to help with purchasing property or paying for specified business expenses.

To qualify

  • To quality for investment credits, your business expenditures must fall under a covered category, which include apprenticeship job creation, child-care space establishment, pre-production mining costs and qualified property.

Qualified property

  • Qualified property credits don't simply cover the cost of the property, they also cover some expenses related to business activities on the property, such as creating products, farming, field processing, machinery, buildings, drilling, logging and prospecting.

3. Home business tax credits

Do you run your Canadian business out of your home? Home business tax deductions are your new best friend.

  • These deductions count home-based expenses such as mortgage interest, household supplies, utilities and others in the deductible category.
  • It's important to separate your personal and commercial expenses before you add these to your business taxes.

Exploring your options

Explore your tax refund and credit options for your Canadian business.

It's tough to get established in the business world, so securing additional capital by lowering your taxes or getting a refund will help out.

Most businesses are eligible for at least a few types of credits and refunds, so exploring your options thoroughly can help you smooth out your cash flow.

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