Tax Planning

    Year-End Tax Planning Checklist for Canadian Businesses

    December 10, 2025
    9 min read

    The weeks leading up to your business's fiscal year-end are a critical window for tax planning. Strategic decisions made before year-end can significantly reduce your tax bill and improve your cash flow. This checklist covers the key strategies every Canadian business owner should review.

    1. Review and Time Your Income

    If your business uses the accrual method of accounting, income is recognized when earned, not when received. However, there are still timing strategies worth considering:

    • Defer invoicing: If possible, delay sending invoices for work completed near year-end until after the fiscal year closes, deferring the income to the next tax year
    • Accelerate collections: Conversely, if you expect to be in a lower tax bracket next year (or want to use losses), consider collecting outstanding receivables before year-end
    • Review work-in-progress: For service businesses, assess the value of unbilled work-in-progress and consider whether to bill it before or after year-end

    2. Accelerate Deductible Expenses

    Look for legitimate ways to bring expenses forward into the current tax year:

    • Prepay eligible expenses: Certain expenses such as rent, insurance, and professional dues can be prepaid before year-end and deducted in the current year (subject to CRA rules on prepaid expenses)
    • Purchase supplies: Stock up on office supplies, materials, and other consumables before year-end
    • Pay outstanding invoices: Settle any accounts payable before year-end to ensure the deduction falls in the current year
    • Make charitable donations: Corporate charitable donations are deductible up to 75% of net income and can be carried forward for five years

    3. Capital Cost Allowance (CCA) Planning

    Capital Cost Allowance is the tax mechanism for claiming depreciation on business assets. Year-end is the time to make strategic asset purchase decisions:

    • Accelerated Investment Incentive Property (AIIP): Assets acquired after November 2018 may qualify for enhanced first-year CCA — up to 1.5 times the normal rate in the first year for most asset classes
    • Immediate expensing: Canadian-Controlled Private Corporations (CCPCs) can immediately expense up to $1.5 million in certain capital asset purchases per year
    • Computer equipment and software: Class 50 (55% rate) and Class 12 (100% rate for certain software) provide generous write-offs for technology investments
    • Vehicles: If you need a business vehicle, purchasing before year-end allows you to start claiming CCA immediately. Review the prescribed limits for luxury vehicles.

    Important: To claim CCA, the asset must be "available for use" before year-end. Simply placing an order is not sufficient — the asset must be delivered and ready for its intended use.

    4. Salary vs Dividend Planning

    If you operate through a corporation, one of the most important year-end decisions is how to compensate yourself. The choice between salary and dividends affects your personal tax, corporate tax, and various benefit programs:

    • Salary advantages: Creates RRSP contribution room, is a deductible expense for the corporation, contributes to CPP (building retirement benefits), and supports EI eligibility if needed
    • Dividend advantages: No CPP or EI premiums (saving approximately 11.9% in combined employer/employee CPP contributions), eligible dividends benefit from the dividend tax credit, and provide flexibility in timing
    • Bonus accrual: A corporation can accrue a bonus to an employee (including the owner) before year-end and deduct it in the current fiscal year, provided the bonus is paid within 180 days of year-end

    The optimal salary/dividend mix depends on your personal income level, RRSP room, corporate income, and personal financial goals. This is an area where professional advice pays for itself.

    5. RRSP Contribution Planning

    If you pay yourself a salary, your RRSP contribution room for the following year is based on 18% of your earned income (up to the annual maximum). Consider the following:

    • Review your current RRSP contribution room on your latest Notice of Assessment
    • If you have unused room, consider making a contribution before the March 1 RRSP deadline (or direct your corporation to make a spousal RRSP contribution)
    • Ensure your salary level generates sufficient RRSP room for future years if you rely on RRSP contributions as part of your retirement strategy

    6. Review Corporate Tax Installments

    If your corporation has a tax liability exceeding $3,000 in the current or preceding year, it must make monthly tax installments. Before year-end, review your installment payments to ensure you are on track. Underpayment attracts interest charges, while overpayment ties up cash unnecessarily.

    CRA offers three methods for calculating installments — prior year, second prior year, or current year estimate. Choose the method that best suits your situation.

    7. Write Off Bad Debts

    Review your accounts receivable for any debts that have become uncollectible. Writing off bad debts before year-end reduces your taxable income. To claim the deduction, the debt must be established as bad (not merely doubtful), and you should document your collection efforts. You can also recover the GST/HST you remitted on those sales by filing an adjustment.

    8. Clean Up Shareholder Loans

    If you have borrowed money from your corporation (shareholder loan), CRA requires that the loan be repaid within one full fiscal year after the year the loan was made. Failure to repay on time means the full loan amount is included in your personal income. Before year-end, ensure any shareholder loans are properly documented and repayment plans are in place.

    9. Review Your Small Business Deduction Eligibility

    The small business deduction reduces the federal corporate tax rate on the first $500,000 of active business income. However, this limit is reduced (or clawed back entirely) once your corporation's taxable capital exceeds $10 million or its passive investment income exceeds $50,000. Review these thresholds before year-end and consider strategies to manage passive investment income if you are near the limit.

    10. Document Everything

    Ensure all year-end transactions are properly documented. This includes:

    • Director resolutions for bonuses, dividends, and other corporate decisions
    • Signed loan agreements for shareholder loans
    • Vehicle logbooks supporting business use claims
    • Home office calculations and measurements
    • Receipts and invoices for all deductions claimed

    Start Your Year-End Planning Today

    Effective year-end tax planning requires advance preparation — not a last-minute scramble. At DLA CPA, we work proactively with our clients throughout the year to identify tax savings opportunities and implement strategies before deadlines pass.

    Contact us today to schedule a year-end tax planning consultation and ensure you are taking advantage of every available opportunity.