Can You Write Off Construction Costs? 

Writing off construction costs depends on the nature of the work and how the property is used. Both the IRS and CRA have specific rules on when and how these costs can be deducted. 

In the US, most construction costs for buildings or significant renovations are considered capital expenses, which are not immediately deductible. Instead, they must be capitalized and depreciated over a set period.  

In Canada, most construction expenses for business properties are capitalized and deducted gradually through Capital Cost Allowance, similar to depreciation. Buildings typically fall under Class 1, with a 4% annual CCA rate. 

Saving money on taxes is crucial for any small business, and taking advantage of deductions can make a significant difference. Here are some key strategies to ensure you don’t miss out on important tax savings.

One often-overlooked deduction is business debt and the interest paid on loans. Many businesses rely on borrowed capital to cover major startup costs, purchase equipment, or fund large projects.

The interest on these loans can often be written off, potentially reducing your taxable income. The size of this deduction depends on your specific business situation, but it’s worth looking into if you’ve taken out financing.

Another way to lower your tax burden is by claiming taxes on your taxes. While it may sound strange, certain taxes you pay such as state sales tax or employment taxes, can be deducted on your tax return. If your business pays a significant amount in these taxes each year, this deduction could lead to substantial savings.

Finally, consulting a tax professional or CPA is one of the best ways to ensure you’re taking full advantage of all available deductions. While handling personal taxes may be straightforward, business taxes are far more complex.