Tax Tips for Small Business Owners: How to Lower Your Tax Bill and Stay Ready for Next Year

Tax season may have just ended, but that makes now the perfect time to get ahead for next year—especially if you're a small business owner. Whether you’re operating through a corporation or running a sole proprietorship, there are smart strategies you can start using today to reduce your tax bill and stay organized.

For Incorporated Small Business Owners (Shareholders):

If you receive dividend payouts throughout the calendar year, there are a few effective ways to lower your tax bill while also planning for the future.

1. Contribute to an RRSP

One of the easiest and most beneficial moves is contributing to your Registered Retirement Savings Plan (RRSP). Not only do you reduce your taxable income, but you're also investing in your financial future.

2. Track Personal Expenses Used for Business

Many business owners use personal resources to support their corporation—and these can often be deducted if tracked properly. Here are some key examples:

• Working from home: If you work from home more than 50 percent of the time, you may qualify for home office deductions. Start tracking expenses like utilities, internet, rent, or property taxes.

• Personal cell phone: If you're using your personal phone for business, you can deduct a portion of your phone bills. Keep the statements and determine a reasonable percentage of business use.

• Vehicle expenses: If you're using your personal vehicle for business purposes, you can deduct things like gas, repairs, maintenance, insurance, licensing, parking, and tolls. Make sure to:

  • Keep all receipts for these expenses.

  • Maintain documentation of your lease or purchase agreement.

  • Track your business mileage using a simple log (you don’t need a fancy app—a notebook or spreadsheet will work just fine!).

⚠️ Important: Always be prepared to justify these expenses if the CRA decides to review your personal return. Good records are your best defense.

For Sole Proprietors:

If you're a sole proprietor, you report your business income directly on your personal tax return. Many of the same strategies used by corporate shareholders also apply to you.

1. Business Use of Home and Vehicle

Just like incorporated business owners, you can claim a portion of your home and vehicle expenses if they’re used for business. This includes:

• Home office deductions (utilities, rent, property taxes).

• Personal vehicle expenses (track business mileage and keep related receipts).

• Phone and internet expenses (if used for business—assign a reasonable portion).

2. Keep Good Records

Staying organized throughout the year makes a huge difference come tax time. Save receipts, track your expenses monthly, and set aside time to review your finances. You’ll thank yourself later.

As an added bonus, we’ve put together a simple, easy-to-use template designed to take the stress out of tracking your work-from-home expenses. Whether it’s utilities, rent, or internet costs, this tool will help you stay organized throughout the year and make tax time so much easier.

FREE DOWNLOAD

Final Thoughts

No matter how your business is structured, staying proactive with your tax planning can make a big difference. These strategies don’t just reduce your tax burden—they also help you build healthy financial habits that keep your business running smoothly.

If you're unsure about what qualifies or how to track things properly, consider consulting a tax professional who specializes in small business. The right guidance can help you take full advantage of the tax breaks available to you.