By October, most Ontario business owners have a much clearer read on the year. You can see what revenue has come in, which customer invoices are still outstanding, how much cash is available, and what you’ve paid yourself so far.
That gives you time to review the decisions that can still affect your tax position before the year closes. Some are straightforward, like checking expenses and planned purchases. Others need more thought, including salary versus dividends, investment income, shareholder loans, or whether your current corporate structure still makes sense.
Whether your corporation’s year-end is December 31 or another date, the end of 2026 is still a good time to review where the business stands. Here’s what to check now so you’re prepared for the tax decisions and deadlines ahead.
How Your Corporate Year-End Affects Tax Planning Deadlines
Before working through any year-end tax planning list, confirm which deadlines apply to you.
Corporate Tax Planning Follows Your Fiscal Year-End
If your corporation has a December 31 year-end, your corporate and personal planning happen on roughly the same schedule.
If it doesn’t, some decisions need to happen before your corporation’s fiscal year-end instead. That can include expenses, capital purchases, bonuses, charitable donations made by the corporation, and other transactions that affect corporate income.
Start by confirming your fiscal year-end and what you expect the business to earn before that date.
Personal Tax Planning Still Follows the Calendar Year
Your personal tax year ends on December 31.
That matters for things such as capital gains and losses, charitable donations, investment decisions and compensation you receive personally.
For an owner-managed business, the corporate and personal sides often need to be reviewed together. A decision that reduces tax inside the corporation can have a different result once you take the money out personally.
Review Income and Tax Deductions Before Year-End
If your financial records are several months behind, you’re trying to plan from incomplete numbers. Start by bringing your bookkeeping up to date and review the major balances before making year-end tax decisions.
Look at unpaid customer invoices and how long they’ve been outstanding. Are there amounts you’re unlikely to collect? Check for expenses the business has already incurred but that may not have made it into the books yet. Review prepaid expenses and deposits as well. Also consider if you are expecting there to be upcoming large expenses between now and the end of the year.
The goal is to make sure the year’s financial records reflect what actually happened.
Tax Deductions Need Proper Records
Year-end is also a good time to check the support behind your deductions.
Depending on the business, that may include:
- Advertising and marketing costs
- Accounting and legal fees
- Software and subscriptions
- Vehicle expenses
- Home-office costs
- Travel and meals
- Business supplies
Not every expense gets the same tax treatment. Some are restricted, while others may need to be claimed over time instead of deducted all at once.
Keep the invoice, receipt or other record that shows what the business paid for and why. The rules can also vary depending on the type of expense, including marketing, professional and legal fees.
Review How You’re Paying Yourself Before Year-End
If you own an incorporated business, how you pay yourself deserves an annual review.
Don’t assume the salary and dividend mix that worked last year still fits this year.
How Salary vs. Dividends Affect Your Tax Position
Salary creates a deduction for the corporation and earned income for you personally. That earned income can create RRSP contribution room. Salary also comes with regular payroll tax requirements and CPP contributions.
Dividends come from corporate income that’s already been taxed. They don’t create RRSP contribution room, don’t require CPP contributions and do not create a tax deduction for the corporation.
The right mix depends on your corporate income, what your cash needs are personally, your other sources of income and your longer-term plans. It also depends on what the business needs to keep.
For example, if the company needs more cash available for payroll, supplier payments, tax instalments or an upcoming purchase, that may affect how much you choose to take out personally before year-end.
Because the answer can change from one year to the next, corporate tax planning should include how you pay yourself as well as what the business needs to retain.
Review Bonuses and Family Compensation
Bonuses can create another timing issue.
If your corporation accrues a bonus at year-end, it generally needs to pay that bonus within 180 days after year-end to deduct it for that year.
If family members work in the business, their pay should match the work they actually perform. A salary should be reasonable for the role.
Dividends to family members may be subject to the tax on split income rules unless a specific exclusion applies, so the payment needs to fit both the person’s role and the tax rules.
Review Capital Purchases in Your Year-End Tax Planning
If the business already plans to replace computers, buy equipment or invest in machinery, the timing of the purchase can affect your tax deduction.
Capital property isn’t treated the same way as a normal operating expense. Businesses often claim the cost over time through capital cost allowance, or CCA, although some property may qualify for faster deductions.
The date you pay for the asset isn’t always the date that matters. In many cases, the asset also needs to be available for use before the end of the relevant tax year.
If a major purchase is already in the budget, bring it into the tax discussion before you place the order.
A tax deduction should still come second to the business reason for the purchase. If moving an equipment purchase forward leaves the company short on cash for payroll, suppliers or tax instalments, the deduction may not be worth the timing.
Review the Proposed 2026 Immediate Expensing Rules
The proposed Productivity Mega Deduction may affect the timing of capital purchases made after September 15, 2026. It would allow immediate expensing for a wider range of depreciable property acquired on or after September 15, 2026, subject to exclusions and other rules.
If your business already plans to make a large capital purchase, the timing may matter.
The deduction shouldn’t be the reason for the purchase. Buying something the business doesn’t need still leaves you with less cash.
Review Capital Gains, Capital Losses and Passive Income
If you or your corporation hold non-registered investments, review what happened during the year before December 31.
That includes gains you’ve already realized, losses you’ve already realized and any investments you’re considering selling.
How Capital Losses Can Affect Year-End Tax Planning
A capital loss may help offset taxable capital gains.
Net capital losses can generally be carried back to apply against taxable capital gains from the previous three years or carried forward for future years, subject to the tax rules in effect.
That doesn’t mean you should sell an investment just to create a loss. Start with whether selling still makes sense from an investment perspective.
The superficial loss rules can also prevent you from claiming a loss right away if you or an affiliated person buy the same or identical property within the relevant period and continue to hold it afterward.
If tax-loss selling is part of the discussion, coordinate with your investment and tax advisors before making the trade.
Also consider whether you have had a significant amount of capital gains through the year. If held within a corporation, you may have room in the capital dividend account to pull additional funds out tax-free. If you trigger capital losses, this will reduce what is available in the capital dividend account.
How Passive Income Can Affect the Small Business Deduction
If your corporation has built up a sizeable investment account, the income from those investments can start to affect how much active business income qualifies for the federal small business deduction.
Under the current federal rules, the business limit starts to shrink when adjusted aggregate investment income earned by a Canadian-controlled private corporation and its associated corporations exceeds $50,000. It can fall to zero once that income reaches $150,000.
To put this in plain language, if you own multiple corporations, the investment income earned by one of them, affects the small business deduction for all of them. And to further complicate things, these rules are not applied equally in all provinces.
For a small business owner, that can change the tax cost of leaving surplus cash invested inside the company.
As the investment balance grows, compare the after-tax cost of investing through the corporation with investing personally. Assess based on your tax position, cash needs and investment income. You can also consider the mix of assets you invest in to help minimize the annual income paid out.
Check Shareholder Loans Before Your Fiscal Year-End
It’s common for money to move back and forth between an owner and their corporation during the year. The tax treatment depends on why the money moved and how it was recorded.
If you borrowed money from the company, review the shareholder loan balance and the date of each amount.
An outstanding shareholder loan can create personal tax consequences if it isn’t repaid within the required period or doesn’t qualify for an exception.
Also check how other withdrawals from the company have been recorded.
A transfer from the business bank account to your personal account might be salary, a dividend, repayment of money the company owes you or a shareholder loan. Those aren’t interchangeable, and the personal tax treatment varies.
Year-end is also a good time to review corporate tax accounts that can affect dividends, including the capital dividend account and refundable dividend tax on hand where they apply.
In practical terms, these balances can affect how much money you can take out of the corporation and the both tax treatment and cost of that payment.
Does Your Current Business Structure Still Fit?
Not every useful year-end discussion needs to end with a transaction before December 31.
Sometimes the more important question is whether the structure you have today still fits the business you’re running.
Maybe the company has grown. Maybe it now holds a large amount of cash or investments. Maybe there are new shareholders, another corporation or plans to buy real estate.
Those changes can affect tax planning, which is why it’s worth revisiting whether your business structure still makes sense from a tax perspective as the company changes.
A reorganization can take time. Legal documents, valuations and tax filings may all be involved.
If the structure needs to change, start the discussion early rather than trying to force it through because a tax deadline is approaching.
Connect Tax Planning With Estate and Succession Planning
The same applies if you expect to sell or transfer the business.
If a child, employee or outside buyer may take over the company within the next few years, the planning often needs to start well before the sale date.
The assets held inside your corporation, the way shares are owned and the structure of the business can all affect the tax result. They can also affect whether shares qualify for the lifetime capital gains exemption when you eventually sell.
If you plan to pass the business to family, an estate freeze or other ownership changes may also be part of the discussion.
If a sale, retirement or family transfer is becoming more realistic, estate and succession planning should become part of the tax conversation before you’re ready to exit.
Year-End Tax Planning Checklist Before December 31
Not every item below will apply to you. The point is to find the ones that do while there’s still time to act.
- Confirm your corporation’s fiscal year-end.
- Bring your bookkeeping up to date.
- Review unpaid customer invoices and possible bad debts.
- Check that expenses are recorded in the correct period.
- Make sure you have records to support your deductions.
- Review your salary and dividend mix.
- Check any bonuses or compensation paid to family members are reasonable.
- Review outstanding shareholder loans.
- Look at planned capital purchases.
- Review investment gains, losses and passive income.
- Check your tax instalments and expected cash requirements.
- Ask whether your current corporate structure still fits the business.
- Start succession or sale planning early if a transition is getting closer.
You may finish the review and decide very little needs to change.
That’s still useful. The purpose is to identify what actually needs attention before year-end and what can wait.
Make Tax Planning Part of Your Annual Business Review
By the time your accountant prepares the tax return, most of the year is already fixed.
A year-end review gives you a chance to look at the numbers while some decisions are still open. That could mean reviewing how you’re paying yourself, checking a shareholder loan, planning a purchase or starting a longer conversation about succession.
What needs attention will depend on your income, cash needs, investments, corporate structure and plans for the business.
If you want to review your 2026 tax position and what still needs attention, contact SBLR’s corporate tax team to discuss your situation.