Even though we normally think of the holiday season as one of the busiest times of the year, the fact is that now is the perfect time to start a home-based business. As a residual income coach in Canada, I can tell you that starting your business now can bring a lot of tax perks that will provide long-term benefits.
When you start a business this month, before the end of the year, you could see a bigger tax return and start your business right, so that you can write off expenses as your business grows next year.
There are essentially two major benefits to starting a business now: start earning more money on your paycheque and the ability to file a loss in your first calendar year and start writing off business expenses. These benefits may seem confusing, but I’ll explain each one so you can start your own business this month and get off to a good start.
Earn More Money Per Paycheque and Invest in Your Business
If you are already employed and want to start your home-based business as either a secondary source of income or just want to build it before you quit your job, you will want to take advantage of this benefit.
You already know that your employer withholds a certain amount from paycheque for taxes. But, did you know that you get to tell your employer how much to withhold?
When you get a tax return, it is because your employer withheld too much that year, so the government owes you the difference. Instead of having too much money withheld each year, why not use it to fund your new business?
Legally, when you experience a financial change, like starting a business, that could affect your taxes, you are allowed to change the amount withheld by your employer. Ask your employer for a TD1 or Personal Tax Credits Return form and ask your employer to withhold the minimum amount for each paycheque.
You’ll notice that your paycheque will be a little bigger and you can use those extra earnings to build your new business. A good tip is to set this money aside in a separate business bank account so that you can more easily manage the money you want to invest.
Claim a Loss Next Year and Start Writing Off Business Expenses
Secondly, if you start a business in December, while earning an income from your job, you will most likely be able to claim a loss on your taxes since you invested in your new business this year. This claim will decrease the amount of taxes you have to pay and could even help you qualify for a refund.
This strategy is an excellent way to give your business that initial boost it needs to start strong so that it will grow over the next year and develop into a lucrative business.
Then, as you begin to invest in your business you can write off your expenses. Starting a home-based business lets you write off a lot of expenses, reducing the amount you have to pay in taxes for the year.
You might be surprised at the amount and type of things you can write off. Some examples of common business expenses that are tax deductible include:
- Office Supplies
- Business Cards
- Advertising Costs and Materials
- Training Programs
- Travel Expenses
- Working Meals
- Telephone and Internet Expenses
- Office Furniture
- Computers and Software Expenses
- Bank Service Charges for Business Accounts
- Credit Card Interest on Business Expenses
If you have a home office, you can also write off a portion of your mortgage interest, home utilities, home maintenance and lawn care costs.
For more details about how to determine what you can write off and how to start tracking your expenses and deductions for tax purposes, you should consult a professional accountant. Any fees you pay to an accountant can also be written off.
If you have been considering starting a home business, now is the time to make your move and get it off the ground. By starting your business now you will be able to take advantage of tax benefits and your business will be ready to grow and develop when the new year starts.
For assistance learning how to start your home business the right way, contact me. I’m a business coach in Canada that helps people create home businesses that allow them to live the lifestyle they want.