Individuals may deduct all expenses incurred in the conduct of the business, provided they are undertaken to earn income, are reasonable under the circumstances and not specifically limited or prohibited.
Examples of business expenses include the following:
Accounting and Legal expenses;
Advertising;
Bad debts;
Business-related memberships;
Business taxes, fees and licenses;
Convention expenses;
Insurance (fire, theft, liability);
Interest and bank charges;
Light, heat and water
Maintenance and repairs (other than motor vehicles)
Office expenses (including postage, stationary, telephone, and other supplies);
Property taxes;
Purchases of materials and supplies;
Salaries;
Traveling expenses;
Workspace in the home (when appropriate)
(For more info please see
www.cra-arc.gc.ca)
EARN EXTRA INCOME AND PAY NO TAX, PLUS REDUCE YOUR TAXES FROM YOUR EMPLOYMENT
Example:
Mr. Edward Smith earns $45,000 from his full time employment. He operates a home-based business as a Wellness Advisor and an Agent selling Tax Reduction Plans.
He doesn’t maintain an inventory of products and he employs his 12-year-old daughter to do his record keeping, answer the phone, and several other duties.
NOTE:
(He gets a deduction for the $3,000 annually that he paid his daughter, another $400 in tax credit from the government if $2,000 goes into an RESP. Potential gain; $900 in tax savings + $400 in credit = $1,300).
Here is a possible Business Income Statement for the year 2004 for tax purposes:
INCOME
From Employment $45,000
From Home-Based Business $15,000
Total $60,000
BUSINESS EXPENSES
Licensing $5,000
Bank Charges 500
Wages (paid to daughter) 3,000
Entertainment (50% of 1,800) 900
Home Office 3,800
Office Expenses 1,900
Auto Expenses 1,200
Accounting fees 500
Telephone 900
CCA
(depreciation on computer and car 1,800
Total $19,500
NET PROFIT/(LOSS) $40,500
What then, is happening here?
First, Mr. Smith earned $15,000 TAX FREE from his home-based business. Furthermore, he also reduced his income from employment by $4,500. Assuming a marginal tax rate of 32%, Mr. Smith has a NET GAIN of $16,440 for 2004. If his daughter contributed $2,000 from her “salary” to an R.E.S.P., she will also receive an additional $400 in credit from the government. Owning a Home-Business could be Your Pathway to Financial Independence!
Whew - there.
Anyhoo - if you want your own side business as an agent for the tax shelter programs - let me know. Our team has a few interesting resources unavailable to the others folks. One such example: a VERY strong relationship with a major bank - who grants our customers lines of credit to use for our systems. It's not get rich quick - or overnight though - it's hard work (you have to study a LOT) - but you can realistically make 4-5k a month doing this.