Managing your small business taxes effectively can mean the difference between keeping more of your hard-earned revenue or overpaying the government. We partnered with tax expert Mark Solis, Founder of Solis Financial, to bring you five essential tax-saving strategies for small business owners that can help maximize savings and build long-term financial security.

1. Incorporate Your Business & Pay Yourself Smartly

If your business is generating consistent revenue, incorporation can help you take advantage of lower corporate tax rates. Instead of taking all earnings as a salary, consider a mix of salary and dividends to lower your personal tax bill. A salary is subject to payroll taxes but provides RRSP contribution room, while dividends are taxed at a lower rate but do not generate RRSP room. This strategy provides flexibility and can help optimize your tax situation.

2. Maximize Small Business Tax Deductions

Every eligible business tax deduction you claim reduces your taxable income. Common small business tax write-offs include:

• Home office expenses (if you work from home)

• Vehicle costs (if used for business)

• Advertising and marketing

• Office supplies and business meals

  
  

Tracking and categorizing expenses properly ensures you don’t leave money on the table when filing your business taxes.

3. Use an Individual Pension Plan (IPP) or RRSP to Reduce Taxable Income

Saving for retirement while lowering your small business taxes is a win-win. If you’re incorporated, an Individual Pension Plan (IPP) allows for higher contribution limits than an RRSP and is a great tax-deferral tool. If you’re a sole proprietor, contributing to an RRSP helps reduce taxable income while building long-term wealth.

4. Set Up a Health Spending Account (HSA) for Tax-Free Medical Expenses

Health and dental expenses can add up, but with a Health Spending Account (HSA), you can cover these costs 100% tax-free. HSAs allow small business owners to deduct medical expenses as a business expense, reducing taxes while providing essential health benefits for themselves and their employees. However, to qualify, business owners must earn more than half of their income from the business. Be sure to review all HSA eligibility criteria to ensure compliance.

5. Split Income with Family Members to Reduce Your Tax Burden

If your spouse or children help out in your business, consider paying them a reasonable salary for their work. This strategy shifts income to lower tax brackets and helps reduce your overall tax burden. Just ensure their compensation aligns with the work performed to meet CRA requirements.

About Mark Solis – Small Business Tax Expert

With over a decade of experience in the financial services industry, Mark Solis founded Solis Financial Services to help Canadians maximize tax savings and achieve financial security through proven insurance and investment strategies. His career began as an Associate Financial Advisor with The Co-operators, where he eventually managed his own office before launching his independent brokerage. Today, he partners with Canada's top insurance and investment companies to deliver the best financial planning solutions to his clients.