Corporate Year-End Tax Planning Checklist for Ontario CCPCs

Corporate year-end tax planning is not just for big companies. Ontario CCPCs of all sizes can take meaningful steps in the final weeks of their fiscal year to reduce both corporate and personal tax. This checklist covers the high-impact decisions that should happen before your year-end — not after.

1. Salary vs Dividend Decision

The most significant year-end decision for most incorporated Ontario business owners is how much salary versus dividends to pay themselves from the corporation. This affects both corporate tax (salary reduces corporate income) and personal tax (salary generates RRSP room; dividends do not).

• Salary: reduces corporate income, generates CPP obligations and RRSP room
• Dividends: no CPP, no RRSP room, taxed at lower dividend tax rates personally
• Integration principle: total tax should theoretically be similar, but differences exist in practice
• Optimal mix depends on personal income needs, RRSP room, and CPP goals

2. Bonus Accrual Timing

Declaring a management bonus before year-end is one of the most effective ways to bring corporate income below the $500,000 small business threshold or to balance income between the corporation and yourself.

• Bonus must be declared before year-end to be deductible that year
• Must be paid within 180 days of corporate year-end (or it becomes non-deductible)
• The bonus is taxable to you personally in the year received, not when accrued
• Properly documented with a board resolution

3. Capital Spending Before Year-End

Purchasing business equipment before your fiscal year-end allows you to claim CCA in that year. Even if the equipment is purchased on the last day of the fiscal year, the half-year rule allows 50% of the normal CCA rate.

• Buy before year-end to start CCA claims this year
• Half-year rule: 50% of normal CCA rate in year of acquisition
• Immediate expensing eligible: 100% deductible in year acquired (up to $1.5M)
• Consider computer upgrades, office equipment, vehicles before year-end

4. Review Passive Income vs the $50,000 Threshold

If your corporation holds investments that generate passive income, review whether you are approaching or above the $50,000 adjusted aggregate investment income (AAII) threshold that triggers the small business deduction grind-down.

• Under $50,000 AAII: full $500,000 SBD business limit preserved
• Over $50,000 AAII: business limit reduced $5 per $1 over threshold
• Consider distributing excess passive income as dividends before year-end
• Realize capital losses to offset capital gains that push AAII over $50,000

5. Shareholder Loan Cleanup

Review your shareholder loan account balance before year-end. Any debit balance (money owed to the corporation by you) must be repaid within one year after the corporate year-end or it becomes personal income.

• Calculate current shareholder loan balance
• If debit balance exists, declare salary or dividend to offset it
• Document all advances and repayments properly
• Review with your accountant to ensure one-year rule is not triggered

6. Accelerate Deductible Expenses

If your corporate income is higher than desired, consider accelerating legitimate business expenses before year-end. Prepaying certain expenses and paying outstanding invoices before year-end brings deductions forward.

• Pay outstanding supplier invoices before year-end
• Prepay annual software subscriptions and service contracts
• Incur advertising and marketing spend before year-end
• Make charitable donations from the corporation (deductible up to 75% of net income)

Key Takeaways

Corporate year-end tax planning requires timely action — most strategies cannot be implemented retroactively after year-end. The earlier in your fiscal year you begin planning, the more options you have. Even businesses in their first year of operation can benefit from reviewing these items with a CPA before closing their books.