aking the most of simess tax Michael DOLLARS AND SENSE A BUSINESS write-off doesn’t mean you get the item or service free, but the deduction certainly kelps pay the bill. And you don’t have to be 2 full-time business to: claim this tax break. “Usually, when you have a busi- ness you may deduct more types of expenses than if you are simply an employee,” said Elio Luongo, of KPMG Peat Marwick Thorne, char- tered accountants. “In general, you may deduct all reasonable amounts you spend to help you earn income from your business.” That means if you are in the 419% tax bracket and claim a $100 business deduction, you save $41 tax. In effect, Ottawa gives youa $41 subsidy toward your $100 expense, but that means you stiil pay the remaining $59. Today, we continue our annual summertime series of tax tips from Luongo and colleague Ed Militzer. Before you make any moves, get all the details to confirm that the fol- lowing ideas apply to your situation and talk to a professional financial adviser. Also, rules and the way they are administered change with dismaying regularity, so check for the latest facts and figures. “Perhaps the simplest way to organize a business is to sell goods and services under your own name as a sole proprietorship,” Militzer said. “Or you could operate as a part- nership, splitting the net income (after expenses) according to each person’s contribution to the busi- ness. Or, depending on your income CANADIAN BONDS AN EXCEPTIONAL INVESTMENT OPPORTUNITY Minimum $10,000 Cail for your FREE REPORT | Tara MacFarlane | 661-7710 MIDLAND WALWYN PELUE CHEP THINKING™ Subject ta change and availabitizy _ and tax position, you could incorpo- rate your business if the benefits outweighed the costs and additional complexity.” You may choose any date for your first business year-end. If vou expect start up fosses for the first year or so and have a sole proprictorship or partnership. you should probably choose a Dec. 31 year end. That way, you may deduct those losses from other (employment, pension, investment) income. On the other hand, if you expect profits right away, a Jan. 31, 1995, year-end will allow you to defer that income (which you eamed in 1994 except for one month) until the 1995 tax year. So you will pay the tax as late as April, 1996, when you file your retum. “However, this is only a deferral — cal}? it an interest-free loan from Revenue Canada,” Militzer said. “Eventuaily, you'll have to pay that deferred tax bill, so make sure you will have the money set aside. Also, you might have to pay tax instal~ ments.” While it’s commen for business- es to have losses when they start up, he said: “Revenue Canada can dis- allow those losses if you are unable to show your business plan before you start. to show when the busi- ness will become profitable.” Luongo said you (the business) may fully deduct most operating expenses like postage, stationery, phone charges, travel expenses. salaries and half of meals and enter- tainment. However, you may claim only a percentage each year of capi- tal expenses like a computer and office furniture. breaks “If partof your home is your principal place of business or you use the space exclusively for busi- ness and regularly meet clients there. you may deduct part of home expenses like heating, property insurance. clectricity. property taxes and mortgage interest or rent.” Luongo said. “Calculate the deductible portion by comparing the work space area to the total house area. “You can‘t create or increase a business loss with home expenses. But you should still report the amounts on your tax return so you can carry forward the claim toa - more profitable year.” Luongo pointed out deferring income or claiming business losses can affect your personal tax posi- tion. For example, keeping personal income low could maximize GST credits and child tax benefits, although this could also reduce your RRSP contribution limit. Running a business means pos- sibly dealing with the GST, provin- cial tax and other mules: if you pay a salary to employees (even if they are family members), you'll need an employer remittance number. You'll have to account for Canada Pension Plan and possibly Unemployment Insurance and Workers’ Compensation premiums, and withhold both thase and income tax deductions. Mike Grenby is a North Shore- ’ based columnist and independent financial adviser who works with individuals; he will answer your questions in this column as space allows —~ write to him c/o 2444 Haywood Ave., West Vancouver, B.C. V7V 17. WAYLONMOTIVE TUNE-UP SPECIALISTS — 'B.C.A.A. « A.R.A. « APPROVED AirCare - Gov. Certified #50222 TUNE-UPS - FUEL SYSTEMS ~ ELECTRICAL OUR 36TH YEAR * CONSULTATION 2176,PEMBERTON AVE, NV AN 8S 7 ASS Free Initial Consultation Douglas W. Lahay CLARK, WILSON RARRISTERS & SOLICITORS 800-885 West Georgia Street, Van. 687-5700 H 24 HOUR MESSAGE 643-3161 : ICBC's policies are not law. [ will get you a fair settlement or trial award. Caring about ‘costs: “Foreign Exch: mge eae Precious Metals. No. Cumissions on Most Transactions’. 7.55% 1 YearGiC: Subject to change whthout notice Ly F Citizens Trust Better than Moncey in the Bunk Call 983-3773 North Vancouver Branch | 202-1217 Lonsdale Ave, North Vancouver WHOLLY-OWNED SUBSIDIARY OF VANCITY « MEMBER CANADA DEPOSIT INSURANCE coneonation’: : For all the latest in the local business scene turn to the North Shore News. We have up to the minute sale information, crime reports, and even special reports on Money Matters.