The 60-day year-end tax planning checklist for incorporated Ontario businesses

Corporate tax planning has a hard cut-off, and it is the fiscal year-end. Once the year closes, the choices that move the number are history and the T2 simply records them: how you were paid, what the company bought and when, whether a loan to yourself was cleared. The checklist below is what we work through with incorporated Ontario clients in roughly the last 60 days of the year. Not every item applies to every company, but every one of them is cheaper to handle before the year-end date than after it.

Start with a profit estimate you can trust

Nothing else on this list can be decided sensibly without knowing what the year looks like. We want books reconciled to at least the end of the second-last month, receivables and payables reviewed for anything stale, and a projection of the final month. Two numbers drive most of the decisions that follow: taxable income relative to the $500,000 small business deduction limit, which is taxed at a combined 12.2% in Ontario, and the owner's personal income to date this calendar year. Our answer on preparing for corporate year-end lists what the bookkeeping should look like at this point.

Decide how the owner gets paid this year

Bonus, salary or dividend

The first question is whether to take income out at all, and the second is in what form. Profit left in the company is taxed at 12.2% and the remainder is available to reinvest or hold; profit paid out as salary is deducted by the corporation and taxed personally at rates that top out at 53.53% in Ontario. Salary creates RRSP room and CPP entitlement; dividends do neither, but avoid CPP contributions and payroll administration. The trade-offs are in salary or dividends from your corporation; the point for this checklist is that a salary or bonus has to be decided before year-end to belong to this year.

The 180-day bonus rule

A bonus accrued at year-end is deductible in the year it is declared only if it is actually paid within 180 days after the year-end. Miss that window and the deduction moves to the year the bonus is paid. The bonus must be resolved and recorded in the minute book, and source deductions are remitted when it is paid rather than when it is accrued. Where the year-end and the payment date straddle December 31, the corporation deducts the bonus in one year and the owner reports it in the next, which is a legitimate one-time deferral.

Salary for RRSP and TFSA room

RRSP room accrues at 18% of earned income up to an annual dollar limit that rises each year, and dividends are not earned income. If the plan is to fund the RRSP, this year's salary is what creates next year's room. TFSA room accrues regardless of income, but the contribution still has to come from cash outside the corporation. A common pattern we set up is salary at the level that fills the RRSP limit, with the balance of the owner's needs taken as dividends.

Clear the shareholder loan account

Money you drew from the corporation that was not salary, dividend or expense reimbursement sits in the shareholder loan account as an amount you owe the company. Under subsection 15(2), a loan not repaid within one year after the end of the corporation's taxation year in which it arose is included in your personal income with no corporate deduction, which is the most expensive outcome in the system for an owner-manager. A series of repayments and fresh borrowings does not reset the clock.

Before year-end the debit balance should be cleared or covered: declare a dividend, record a bonus, offset expenses you paid personally, or repay it. Whatever balance remains attracts a taxable interest benefit at the CRA's prescribed rate. Our answer on shareholder loans covers the exceptions, including loans to buy a home or a vehicle used in the business.

Time capital purchases by the available-for-use date

Capital cost allowance starts in the year an asset becomes available for use, not the year it was ordered or invoiced. Equipment delivered and running on the last day of the year earns a first-year claim; equipment in a shipping container on January 2 does not. The enhanced first-year rules have shifted several times since 2018 and were revisited again in the November 2025 federal budget, so confirm the rate for your asset class and acquisition date before buying for tax reasons alone. Buying something you need anyway a few weeks early is sound; buying something you do not need to save 12.2% of its cost is not.

Two smaller items belong here. Dispose of assets with no remaining value before year-end so any terminal loss lands in this year, and revisit whether leasing or owning suits the next vehicle or machine, which we cover in lease or buy equipment.

Check passive income against the $50,000 threshold

Investment income earned inside the corporation, or an associated one, reduces the small business deduction. Once adjusted aggregate investment income in the previous year exceeds $50,000, the $500,000 limit falls by $5 for every dollar over and reaches zero at $150,000. Interest, rent, taxable capital gains and portfolio dividends all count. Ontario chose not to parallel this measure for its own 3.2% small business rate, so the grind is felt on the federal portion.

If the company holds a portfolio, we pull the prior-year figure now and decide whether to realize gains this year, defer sales into the next, or move investments somewhere the grind does no harm. The mechanics are in how passive income reduces the small business deduction, and the refundable tax side is in our answer on how RDTOH works.

Confirm the capital dividend account balance

The non-taxable half of capital gains, and life insurance proceeds above the policy's adjusted cost basis, accumulate in the capital dividend account. A capital dividend reaches shareholders tax-free, but only with an election on Form T2054 filed on or before the day the dividend is paid. Two timing points matter at year-end. A capital loss realized later in the year reduces the balance, so pay the capital dividend before the loss is triggered; and the balance should be rebuilt from the corporate history before any election, because an election that overstates it draws a 60% penalty tax. Our explainer on the capital dividend account goes further.

Giving, health benefits and paying family

Charitable donations from the corporation

A corporation deducts donations against income rather than claiming a credit, up to 75% of net income, with a five-year carry-forward for the excess. Donating publicly listed securities in kind eliminates the capital gain and credits the full gain to the capital dividend account, which usually beats selling the shares and donating cash. The receipt date must fall inside the fiscal year.

Health spending accounts

A private health services plan lets the corporation deduct medical and dental costs that would otherwise be paid with after-tax dollars, and the benefit is not taxable to the employee. Where the owner is the only employee, the CRA looks closely at whether a genuine plan of insurance exists. Set it up through an administrator with written terms and a defined annual limit, not as a year-end reimbursement of a shoebox of receipts.

A spouse or children on payroll

Salary to family members is deductible when the work is real and the pay is what you would offer a stranger for the same work. Dividends to family fall under the tax on split income rules, and the exclusions are specific: a spouse where the owner is 65 or older, an adult who averaged 20 hours a week in the business this year or in any five prior years, or an adult holding 10% or more of votes and value in a company that is not a professional corporation and earns less than 90% of its income from services. Our answers on paying family a salary and paying a spouse dividends set out the tests.

Tie out HST and payroll before the books close

The CRA matches the sales on your GST/HST returns to the revenue on your T2, and T4 and T5 slips to what the corporation deducted or paid. Before year-end we reconcile the HST collected and input tax credit accounts in the general ledger to the returns actually filed, and payroll remittances to the payroll register. Differences found now are adjustments; differences found by the CRA are assessments. This is also the moment to confirm that a resolution exists for every dividend paid, that the minute book reflects the bonus and dividends decided above, and that any T5 or T4 due by the last day of February is already in the plan.

The 60-day timeline

Year-end planning is where a fractional CFO engagement pays for itself: every decision above depends on a current picture of the business rather than statements produced months after the fact. If your books are not close enough to real time to run this list, our bookkeeping team gets them there first. The dates that follow the year-end are laid out in our small business tax calendar.

Source: CRA — T4012, T2 Corporation Income Tax Guide.