CIBC offers expert tips and strategies small business owners can use to trim their 2010 taxes
While many Canadian small business owners find themselves busy wrapping up their fiscal years this holiday season, they could be missing out on substantial 2010 tax savings if they fail to take advantage of certain opportunities soon.
“Small business owners have some unique tax-saving strategies they can employ towards the end of the year to help boost their overall savings for 2010. For example, if you’ve been mulling over the purchase of new business assets, December is the most advantageous time to take action from a tax perspective,” says Jamie Golombek, CIBC’s Managing Director of Tax and Estate Planning.
“It’s definitely to the advantage of small business owners to take time out during the holidays to discuss year-end tax strategies with a financial advisor or tax professional as many of these activities must be completed by December 31 in order to realize tax savings for 2010.”
To help small business owners capitalize on year-end tax-saving opportunities, Golombek offers the following three tips for discussion with an advisor:
1. Now is the time to purchase business assets
If you’re self-employed or a small business owner, you may wish to consider accelerating the purchase of new business equipment or office furniture that you may have been planning to purchase in 2011. Under the tax rules, you are generally permitted to deduct, under the “half-year rule,” one half of a full year’s tax depreciation in 2010, even if you bought it on the last day of the year. For 2011, you can then proceed to claim a full year’s depreciation.
For computer equipment purchased before February 2011, you can write off 100 per cent of the cost in the year of acquisition – with no half-year rule.
2. Rethink year-end compensation
If your business is incorporated and you are facing an approaching December 31 corporate year-end, you may wish to revisit your salary-dividend mix for 2010. It may make more sense for small business owners to pay themselves exclusively through dividends rather than salary in 2010. While this precludes them from making an RRSP contribution next year as dividends are not considered “earned income,” they may be better off saving money inside their corporations rather than inside an RRSP.
Talk to your advisor about the potential tax savings advantage dividends may offer over salary and about the tax deferral advantage of leaving funds inside the company as opposed to paying them out immediately. (For a more in-depth analysis of this topic, please see Golombek’s special report released in October 2010 entitled ‘Rethinking RRSPs‘.)
3. Have your corporation reimburse rewards-paid travel
If you used personally-earned credit card rewards points, such as Aeroplan Miles, to travel for business, have your corporation reimburse you for the value of the travel. Your corporation can deduct the expense and it’s non-taxable to you personally.
“To make sure tax-planning for your business stays a priority all year long, it’s important for small business owners to review these and other strategies with an advisor on a regular basis,” adds Golombek. “Discussing your tax situation with a professional can help you ensure you’re taking advantage of all the available tax minimization strategies.”
CIBC (CM: TSX;NYSE) is a leading North American financial institution with nearly 11 million personal banking and business clients. CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada, and has offices in the United States and around the world. You can find other news releases and information about CIBC in our Press Centre on our corporate website at http://www.cibc.com/.
For further information:
Media contact: Kevin Dove, Communications and Public Affairs, CIBC, at 416-980-8835, [email protected].