Fence and deck tax: what a deposit, a lift of lumber, and a truck each do to your return

Deposits held at year-end are income with a reserve, not free money

A deposit taken in November for a deck you will build in April is included in income when received. The Income Tax Act then lets you claim a reserve for amounts received for services not yet rendered, so the net effect is that the income is deferred until the work is done, but only if the reserve is claimed. Books that never separated deposits from sales cannot support that reserve, and the CRA does not assume it for you. We prepare a schedule of deposits held at the year-end date, claim the reserve, and reverse it the following year as each job completes.

The mirror image matters just as much. A fence finished in December and invoiced in January is December income for tax, whether or not the customer has paid. Jobs that straddle the year-end date get looked at one by one: what was done, what was billed, and what is still owed.

Lumber in the yard is inventory; lumber in a fence is cost of sales

Material you paid for but have not installed is not yet a deduction. At year-end it is valued as inventory, at the lower of cost and fair market value, and carried forward to the year it is used. For a builder who buys lifts of pressure-treated lumber ahead of a price increase, or who has special-order composite waiting for a spring build, that carry-forward can be substantial. The upside of the rule is real too: when lumber prices fall after you bought, the write-down to market is deductible in the year the price dropped. We take a count on the last day of the fiscal year and cost it from the supplier invoices, which is a two-hour job when the books are by job and a two-day one when they are not.

Trucks, trailers, and augers: CCA classes that fit a deck builder

Capital cost allowance is where the truck, the trailer, and the tools turn into deductions, at rates that depend on the class. The trade-specific point is the truck: a pickup used mainly to haul material and tools is generally excluded from the passenger-vehicle definition, which means no cost cap and no separate Class 10.1. A regular-cab pickup qualifies when hauling is more than half its use; a crew cab needs hauling to be almost all of its use. An SUV, or a crew cab that doubles as the family vehicle, falls back to the passenger-vehicle cap, which is indexed each year and, as at the time of writing, sits at $38,000 before tax for 2025 purchases. Either way the CRA will want a mileage log to support the business-use percentage.

First-year CCA rules have changed several times in recent years and, as at the time of writing, are again in transition, so we check the rules that apply to the month of each purchase rather than assume last year's treatment. Timing a truck purchase for late fall or early spring can change the first-year deduction materially.

HST: an input tax credit on every board, and a filing frequency that fits

Fence and deck work is fully taxable at 13 percent in Ontario, and material is a large share of every invoice, so input tax credits are worth chasing on every lumber-yard receipt. That is also why the quick method rarely wins for this trade: it trades away ITCs on purchases for a lower remittance rate, and a business spending heavily on material usually loses on the trade. We run both calculations before recommending either. Filing frequency is a real choice for a seasonal business: quarterly returns keep HST from piling up through the summer as a balance you have already spent by December, while annual filers with net tax over $3,000 owe quarterly instalments anyway.

One more HST point comes from the trade's reputation. The CRA treats home renovation and construction as a priority sector for underground-economy audits, and a builder whose bank deposits do not match invoiced revenue, or whose material purchases imply more jobs than were reported, is an easy file to open. Complete job records are the defence, and they cost less than the audit.

Instalments and T5018s for a business that earns nothing in February

A corporation owes instalments once its tax bill passes $3,000, monthly by default, though many small CCPCs with a clean compliance history qualify to pay quarterly instalments instead. A sole proprietor pays personal instalments on March 15, June 15, September 15, and December 15. Two of those dates land before you have built anything. Our fix is mechanical: a percentage of every final invoice is swept to a tax account through the season, so the March and June payments are drawn from last October's money rather than a line of credit.

The T5018 return for subcontractor payments is due within six months of your fiscal year-end, and we file it from the sub-tagged bills in your books. If any of your material comes from US suppliers or you ship product across the border, our cross-border guide for fence and deck builders covers the duty and GST side; our tax services page covers how we prepare T2s and T1s for every client.

Source: CRA — Classes of depreciable property.