Fun tax deductions your corporation can legally claim

Real estate investors, medical professionals, and business owners have many reasons to incorporate, but one of my favourites doesn’t get talked about enough: the flexibility it gives you around deductions. Over the years, I’ve found there aren’t nearly enough people taking full advantage of what I’ll call the fun tax deductions a corporation can offer. In this post, I want to walk you through a few examples, from meals and entertainment to golf memberships, and show you why the math often works out better than you’d expect.

Video Transcript: Fun tax deductions your corporation can legally claim

There are different reasons to incorporate, and one of the biggest upsides is more flexibility with tax deductions.

Fun tax deduction 1: Meals and entertainment

While we have to be reasonable, a corporation gives us a better ability to deduct meals and entertainment type expenses. You do have to be cautious, though. Make sure you’re not writing off a dinner for two on February 14th. And be careful around birthdays and anniversaries.

Be reasonable, but don’t leave money on the table either. I don’t think enough people take advantage of the fact that your favourite accountant, and mine, may enjoy a good bottle of scotch now and again. That’s actually a good way to test out the tax benefits and your ability to make these kinds of deductions. I think it’s a fantastic idea.

Fun tax deduction 2: Vacations and business trips

Vacations and business trips are another area worth looking at. I’m not suggesting all your vacations suddenly become business trips, but there are often legitimate portions of certain trips that can be carved out and deducted. Between vehicles, home office, education, and more, you have more choices than you might think. (For more details, see Claiming travel expenses for real estate investors and Claiming travel expenses for medical professionals.)

Fun tax saving #3: Golf, gym, and social memberships

Whether it’s golf, gym memberships, skiing, or social clubs, the numbers can work in your favour. Say you’re going to spend $10,000 on one of these. In a corporation, that $10,000 isn’t necessarily deductible, but it’s also not necessarily a taxable benefit to you personally.

Here’s why that matters:

  • If I spent $10,000 on golf personally, with the money coming from a corporation or a job, I’d need roughly $21,000 out of a 53% tax bracket to cover that $10,000.
  • If I had it in the corporation instead, depending on my tax level, I might only need $11,000, or perhaps $13,300, to cover that same $10,000.

Not only is there enough room to deduct your own golf, there’s more than enough room to invite your favourite accountant along, or even pay for his membership too. The tax savings here are significant. It’s not deductible, and it’s also not taxable, and for some business owners, that combination alone justifies using a corporation.

Resources

For additional resources related to fun tax deductions using a corporation, see:

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Remember – circumstances are unique! This information is summary in nature. Seek out advice from your tax advisor about your specific situation.