Year-End Tax Planning Checklist for Incorporated Ontario Professionals

By the time your fiscal year actually ends, most of the decisions that determine your tax bill have already been locked in. Year-end tax planning is not something you do after the year closes, it is a review you do in the last few months while there is still time to act. Here is what actually moves the number.

Finalize Your Salary and Dividend Mix

If you have been drawing dividends, salary, or a mix all year without a final review, year end is when you true it up. Confirm how much RRSP room you actually want to generate, whether you have hit an efficient CPP contribution level, and how the mix affects your personal return before the year closes rather than after.

Review Shareholder Loans

If you have taken funds out of the corporation as a shareholder loan rather than salary or dividends, there is a hard deadline: the loan must be repaid within one year after the end of the corporation's tax year in which it was made, or the full amount gets added to your personal income. This is one of the most expensive year-end oversights we see, entirely preventable with a calendar reminder.

Time Your Capital Purchases

Equipment, computers, and other capital assets purchased and put into use before year end can generate Capital Cost Allowance for the current tax year. If you were already planning a purchase for early next year, moving it up (or deliberately pushing it back) can shift real deductions between tax years depending on which one needs them more.

Check Your Passive Investment Income

If your corporation holds retained earnings and investments, passive investment income above $50,000 in a year starts grinding down your Small Business Deduction, dollar for dollar. This is easy to miss because it is based on investment income, not your active business income, and it is worth reviewing before year end rather than discovering it on your T2.

Reconcile HST Before You Close the Year

Outstanding HST discrepancies are far easier to fix before your books close for the year than after. A clean HST reconciliation at year end also makes your T2 preparation faster and cheaper, since your accountant is not untangling issues from four different filing periods at once.

Confirm Your Bonus and Accrual Strategy

Corporations can accrue a bonus at year end and deduct it in the current year, as long as it is actually paid within 180 days of the year end. This is a common tool for managing how much income stays in the corporation versus flows out, but it needs to be decided and documented before the year closes, not after.

The Bottom Line

None of this works well as a scramble in the weeks before filing. The professionals who consistently minimize their tax bill are the ones having this conversation with their accountant every year, before the year ends, not after.