Tax Tips: Claim business expenses now

It’s that time of the year when advisors want their businesses and individual taxpayer clients to drop everything and turn their focus to year-end tax planning.

Now is the time to employ some end-of-year tax planning strategies that can help minimize the overall tax burden by taking advantage of time-sensitive tips that require implementation before the end of the year or early in 2012.

In this multiple-part series, Advisor.ca shares some year-end tips to reduce tax liability, but all of them take planning.

It is December already but there’s no need to panic—there’s still plenty of time to put last-minute planning techniques into play, says Gary Dent, national tax leader at Grant Thornton.

“Just a little bit of planning in November or December can go a long way in reducing your tax burden for this year,” he says.

Taxpayers can start with planning to take advantage of the higher corporate tax rates this year by accelerating their business expenses into 2011.

The corporate tax rates in Canada are falling in the new year, making Canada a unique jurisdictions in that regard. The federal corporate income tax rate of 16.5% is due to fall to 15% for 2012, and the general corporate tax rates and/or small business tax rates of some provinces, such as Ontario, are also declining.

Therefore, it makes sense to accelerate expenses to 2011 to reduce the amount of income being taxed now.

“If you have any expenses that you can deduct this year, you should try to deduct them,” says Dent. “For example, if you’re going to make an acquisition of a new piece of equipment, you may want to buy it before the end of the year so you can put it in your write off pool and claim depreciation, or capital cost allowance as it’s referred to on the tax side, against your income.”

As long as the asset is purchased this year, the claim can be made this year. “Even if you buy it on December 30, as long as you’re putting it to use, you can make that claim and get that deduction this year when the rate is higher as opposed to next year.”