Paying taxes isn’t the most exciting part of life, but it helps Ghana build schools, hospitals, and roads. Thankfully, the Income Tax Act, 2015 (Act 896) gives taxpayers ways to reduce their tax bills by allowing certain deductions (reductions). Here’s how to make sure you only pay taxes on what’s fair.
Two Key Terms to Know:
- Assessable Income: This is the total money you earn from work, business, or investments.
- Chargeable Income: After subtracting certain allowed expenses, this is the part of your income you pay tax on.
Let’s dive into 8 tax deductions you can claim to save money legally:
1. Expenses for Earning Money
If you spend money to make money, like buying business supplies or advertising, you can deduct these expenses.
Important: These costs must relate directly to income you have made this year, not for future profits.
2. Interest on Loans
Borrowed money to grow your business or invest? You can deduct the interest paid on that loan, but only if it was used to earn income during the same year.
3. Repairs and Upgrades
Fixing or improving business property, like buildings or equipment, can be deducted. For example: fixing a broken machine in your factory. This applies even if the repair lasts longer than a year, as long as it’s directly tied to earning income.
4. Research and Development (R&D)
Money spent on improving your business or developing products is deductible. An example is testing a new product idea or improving production. However, the cost of purchasing equipment for R&D doesn’t count; only operating or maintenance costs do.
5. Unpaid Debts (Bad Debts)
If a customer owes your business money but you’ve tried everything to recover it, like hiring collectors or going to court, you can write it off as a bad debt. For example: a client disappears or can’t pay their debt.
6. Charitable Donations
Giving to government-approved causes, like charities or scholarships, can reduce your taxes. Examples include: donations to education funds or sports development projects. Tip: Always get proof of your donation to claim this deduction.
7. Hiring Fresh Graduates
If your company employs recent graduates from recognized universities, you can claim extra tax benefits. You can get an extra tax deduction of 10%-50% of their salaries.This encourages businesses to hire young workers and supports reducing unemployment.
8. Work-Related Travel
Travel expenses are deductible if they’re directly tied to your job. For example: a salesperson traveling to meet clients or a lawyer traveling to court. However, daily commutes between home and work don’t qualify.
Why Do Deductions Matter
Understanding deductions means you pay tax only on what’s fair. By claiming these allowed expenses, you can lower your tax bill while staying within the law—and keep more money in your wallet.
Alhassan Aboagye on behalf of OSD and Partners
