Small Business Help: The Small Business Tax Deduction- Does Your Business Qualify?

Small Business Deductions Canada

Running a small business is hard. If you own or manage one in Canada, amidst all the challenges you face everyday, you also know the value of information that would make your business lose or gain, specially during this tax return season. Are you taking advantage of the federal Small Business Deduction (SBD) that you could be writing off against your business income?

For the tax years ending after 2016, the Small Business Deduction (SBD) remains at the 2016 level of 17.5 per cent but under some proposed changes, the SBD will increase to 18 per cent effective January 1, 2018, and to 19 per cent effective January 1, 2019. These changes will result in a reduction in the small business tax rate from 11 per cent to 10 per cent for 2018, as a first step toward lowering it to 9 per cent in 2019. The small business tax rate applies to the first $500,000 of active business income. Consult Chapter 4 of the T4012 – T2 Corporation Income Tax Guide for further details.

To qualify for SBD, a corporation must be classified as a Canadian-controlled private corporation (CCPC) by meeting specific conditions according to Chapter 1 of the T4012 – T2 Corporation Income Tax Guide. The complete Guide is available on the CRA website in HTML and PDF formats.

This intended reduction is expected to provide a small business with up to $7,500 in federal tax savings per year.