Did you know that 30% of entrepreneurs believe they overpay taxes and could claim more deductions and credits? Fortunately, an expert joins us today to make sure you aren't one of them. Peyman Salari, investment advisor and founder of B.C.-based financial advisory firm Canadian WiseInvest™ Inc, joins us with his practical steps to maximize your tax savings as a business owner.
A survey by leading B2B research and ratings company, Clutch, finds that 30% of small business owners believe they overpay taxes and could claim more deductions and credits. Calling on a financial expert can make all the difference in identifying those deductions and credits you’re entitled to, helping you decrease your tax bill.
Peyman Salari, investment advisor and founder of B.C.-based financial advisory firm Canadian WiseInvest™ Inc, joins us with his tips on how you can maximize your tax savings as a business owner. Open a health spending account Peyman shares that a client once paid $20,000 out of pocket for family medical expenses, before learning those expenses could be paid from a corporate health spending account (HSA) with major savings.
“If you’re in the highest tax bracket, you have to withdraw $40,000 to use $20,000 for medical expenses,” Peyman explains, “but you can pay that $20,000 from your corporate pocket and save a huge amount of tax.” Invest in a pension plan There are plenty of retirement savings plans out there, but most require you to invest with your personal funds. Pension plans allow you to invest corporate funds in a tax-sheltered account while giving you added tax deductions. “At retirement, you could be the beneficiary of that account,” Peyman says. “You could take out money and pay taxes at that time.” Pension plans also let you invest more than you may be able to with traditional retirement savings plans, like registered retirement savings plans (RRSPs). While you can only contribute up to 18% of your annual salary in an RRSP, you can contribute more to a pension plan. So, if you’ve reached the maximum for your annual RRSP contribution, a pension plan can pick up where your RRSP left off. Incorporate your company Incorporating your company opens the door to savings you wouldn’t otherwise have.
If you make $300,000 a year and only need $100,000 for living expenses, Peyman explains, you’re bumped into the highest tax bracket and you have to pay taxes on the full $300,000. When your business is incorporated, that money goes into your company and the only personal tax you’ll pay will be on the money you withdraw for yourself. You’ll also be eligible for other tax deduction initiatives, like a health spending account—which you can’t get unless your business is incorporated. Get insurance Insurance is an important tool to protect you, your family and your business in the event the unthinkable happens.
It’s a tax-saving tool, too, especially on the corporate life insurance side. Peyman suggests a setup with tax-sheltered growth that can roll into a tax-efficient retirement income. It’s important to review your policy regularly to cover the cost of inflation, which Peyman calculates at 4% a year for now and 2% in long run. Find the right advisor
As an entrepreneur or small business owner, you’re busy. A good financial advisor understands that and will do the groundwork for you, so you have all the information you need to set financial goals and make a smart financial plan. That said, it does take some time to explore your options and come up with a solid financial plan. It’s time well spent, Peyman says, considering you work hard for your money and deserve to protect it.