As a corporation in Canada, you are entitled to take advantage of various tax credits to reduce your tax bill. Tax credits are beneficial because they provide dollar-for-dollar reductions in your taxes payable, making them more valuable than deductions.
Here is a closer look at some of the most common tax credits for corporations:
- Scientific Research and Experimental Development (SR&ED) Tax Credit: The SR&ED tax credit is available to corporations that perform scientific research and experimental development in Canada. This credit can be claimed on eligible expenditures, including wages, materials, and overhead expenses. The SR&ED tax credit is a significant tax incentive that can reduce a corporation’s tax bill by up to 35%.
- Ontario Innovation Tax Credit: The Ontario Innovation Tax Credit is available to corporations that perform scientific research and experimental development in Ontario. This credit can be claimed on eligible expenditures, including wages, materials, and overhead expenses. The Ontario Innovation Tax Credit is a refundable tax credit that can reduce a corporation’s tax bill by up to 8%.
- Ontario Interactive Digital Media Tax Credit: The Ontario Interactive Digital Media Tax Credit is available to corporations that develop interactive digital media products in Ontario. This credit can be claimed on eligible expenditures, including salaries, wages, and other labour costs. The Ontario Interactive Digital Media Tax Credit is a refundable tax credit that can reduce a corporation’s tax bill by up to 35%.
- Apprenticeship Job Creation Tax Credit: The Apprenticeship Job Creation Tax Credit is available to corporations that hire and train apprentices in skilled trades. This credit can be claimed on eligible expenditures, including salaries, wages, and other labour costs. The Apprenticeship Job Creation Tax Credit is a non-refundable tax credit that can reduce a corporation’s tax bill by up to 10% of the eligible wages paid to apprentices.
- Ontario Film and Television Tax Credit: The Ontario Film and Television Tax Credit is available to corporations that produce eligible film and television productions in Ontario. This credit can be claimed on eligible expenditures, including salaries, wages, and other labour costs. The Ontario Film and Television Tax Credit is a refundable tax credit that can reduce a corporation’s tax bill by up to 35%.
- Capital Cost Allowance (CCA): The Capital Cost Allowance (CCA) is a tax deduction that allows corporations to claim a portion of the cost of capital assets. This deduction can be claimed on eligible assets, such as buildings, machinery, and equipment. The CCA deduction allows corporations to write off the cost of assets over time, reducing their taxable income and their tax bill.
Incorporating your business can provide significant tax advantages, and taking advantage of tax credits is just one way to maximize those advantages. By understanding the tax credits available to your corporation and working with a knowledgeable tax professional, you can reduce your tax bill and keep more of your hard-earned money.
In conclusion, understanding tax credits for corporations is an essential part of managing your corporation’s finances. Take the time to research the available tax credits and work with a tax professional to ensure that you are maximizing your tax savings. By doing so, you can reduce your tax bill and increase your corporation’s profitability.