2026 Year-End Tax Planning Checklist for Ontario Small Businesses

Most tax planning has a deadline, and for many Ontario business owners that deadline is December 31. Once the calendar year (or your corporation’s fiscal year) ends, many of the most effective planning opportunities disappear. Your accountant can still prepare an accurate return in the spring, but they can’t go back and change what you did.

This checklist covers the moves to consider before year-end in 2026. Not every item will apply to you, and some depend on your specific circumstances, but working through the list with your accountant in November and December is one of the highest-return conversations you’ll have all year.

Key takeaways

• Planning must happen before year-end. Accountants can report what happened; they can’t undo it.
• Start with clean, current books. Every decision on this list depends on knowing your actual profit.
• Key decisions include owner compensation (salary, bonus, dividends), timing of capital purchases, RRSP and TFSA contributions, and managing passive income in corporations.
• Payroll and HST reconciliation before year-end prevents costly corrections in January and February.
• The 2026 RRSP contribution deadline for deductions on your 2026 personal return is March 1, 2027.

Step zero: get your books current

Every item below depends on accurate numbers. Before you can decide how much salary to pay yourself, whether to buy that equipment now, or how much to put in your RRSP, you need to know where your business actually stands.

Before mid-November:

• Reconcile all bank, credit card, and loan accounts through October.
• Record all outstanding invoices and bills.
• Review receivables and follow up on overdue accounts.
• Produce a year-to-date income statement and balance sheet.
• Project the remaining months of the year to estimate full-year profit.

If your books are behind, this is the moment to catch up. Planning on estimates is better than nothing, but planning on real numbers is far better.

For incorporated business owners

1. Finalize your compensation plan for the year

Decide how much to take from your corporation, and in what form, before year-end:

• Salary: paid through payroll, deductible to the corporation, creates RRSP room, and requires CPP contributions. For 2026, generating the full 2027 RRSP limit of $35,390 requires roughly $196,600 of earned income in 2026.
• Bonus: a corporation can accrue a bonus at year-end and deduct it in the current year if it’s paid within 180 days after year-end, with source deductions remitted on time.
• Dividends: paid from after-tax profit, no CPP, no RRSP room, simpler to administer. Declare by resolution.

Consider your household’s total income across both spouses, your personal cash needs, your RRSP and CPP goals, and any planned mortgage application.

2. Manage the small business deduction limit

If your corporation’s active business income is approaching or exceeding $500,000, consider whether paying additional salary or bonus to bring income down to the small business limit makes sense. Income above the limit is taxed at 26.5% in Ontario rather than 12.2%.

3. Watch your passive investment income

If your corporation (with associated corporations) earns more than $50,000 of passive investment income in 2026, its small business limit for 2027 will be reduced by $5 for every $1 over $50,000. Strategies to manage this include timing capital gains, considering the mix of investments (for example, growth-oriented assets that defer realization), and in some cases using corporate-owned life insurance or an individual pension plan. These require advice tailored to your situation.

4. Clear up the shareholder loan account

Review all transactions between you and your corporation. Personal expenses paid by the corporation, money taken out without classification, and amounts you’ve lent to the corporation should all be reconciled. Amounts owed to the corporation that aren’t repaid within one year after the end of the fiscal year in which they arose may be included in your income. Year-end is the right time to decide whether to repay, declare a dividend, or pay a bonus.

5. Consider paying dividends to reduce RDTOH

If your corporation has a refundable dividend tax on hand (RDTOH) balance from investment income, paying taxable dividends can trigger a refund of corporate tax. Your accountant can calculate the optimal amount.

6. Pay eligible dividends where available

If your corporation has a general rate income pool (GRIP) balance, typically from income taxed above the small business limit or from eligible dividends received, dividends can be designated as eligible, which are taxed at lower personal rates.

7. Review family compensation

If family members work in the business, make sure their salaries are reasonable for the work they do and properly documented. Review whether any family members qualify for exceptions to the tax on split income (TOSI) rules before paying them dividends.

8. Make sure minute book records are up to date

Dividends should be declared by resolution. Annual resolutions, director appointments, and share transactions should be documented.

For all businesses (incorporated or not)

9. Time capital purchases

If you’re planning to buy equipment, computers, vehicles, or other capital assets in the near future, consider whether buying before year-end helps. Generally, assets acquired and available for use before year-end allow a capital cost allowance claim for that year, often subject to rules that limit the first-year claim. Recent federal budgets have also introduced or extended immediate expensing and accelerated CCA for certain asset categories, including some productivity-enhancing assets such as computers and data network infrastructure, and manufacturing and processing equipment, subject to legislation and effective dates. Confirm eligibility with your accountant before relying on these measures.

Caution: don’t buy something you don’t need just for the deduction. A deduction reduces tax, but you still spend the money.

10. Pay expenses you’ll incur anyway

Paying for genuinely needed supplies, services, or repairs before year-end can move deductions into the current year. This mainly matters if your income is higher this year than you expect next year.

Prepaid expenses for future periods generally aren’t deductible until the period they relate to, so prepaying next year’s rent in December won’t usually help.

11. Write off bad debts

Review your receivables. If a customer’s account is genuinely uncollectible, document your collection efforts and write it off before year-end so you can deduct it. If you’re an HST registrant, you may also be able to recover the HST you remitted on the bad debt.

12. Reconcile HST

Make sure HST collected and paid in your books matches your filed returns. Review whether you’ve missed any input tax credits, especially on larger purchases, and confirm you’re charging the correct rates on out-of-province sales.

If you’re an annual filer whose net tax last year was $3,000 or more, confirm your quarterly instalments are up to date.

13. Reconcile payroll

Before December’s final pay run:

• Confirm year-to-date CPP, CPP2, and EI deductions for each employee.
• Process taxable benefits, including gifts, vehicle benefits, and any other benefits, through payroll before year-end.
• Reconcile year-to-date remittances to your payroll register.
• Make sure all employee information (addresses, SINs) is current for T4s, which are due February 28, 2027.

14. Review employee gifts and holiday events

Non-cash gifts and awards to employees may be non-taxable up to the CRA’s annual limit, but cash and near-cash gifts (including gift cards) are generally taxable. Holiday parties open to all employees are generally a non-taxable benefit if the cost per person is reasonable. Meals and entertainment are usually 50% deductible, but there are exceptions for events available to all employees at a location (up to six per year).

15. Consider charitable giving

If you plan to donate, doing so before December 31 secures the credit or deduction for 2026. Corporations can deduct donations; individuals receive credits. Donating publicly listed securities with accrued gains directly to a registered charity can eliminate the capital gains tax on those securities.

Personal tax items for business owners

16. RRSP contributions

The RRSP dollar limit for 2026 is $33,810, but your personal limit is shown on your latest Notice of Assessment. Contributions made by March 1, 2027 can be deducted on your 2026 return. RRSP contributions are most valuable in years when your income is high.

17. TFSA contributions

The 2026 TFSA dollar limit is $7,000. If you plan to withdraw from your TFSA, consider doing it in December rather than January: withdrawals are added back to your contribution room at the start of the following year.

18. First Home Savings Account (FHSA)

If you’re a first-time home buyer, the FHSA allows annual contributions of $8,000, up to a $40,000 lifetime limit. Contributions are deductible like an RRSP, and qualifying withdrawals for a home purchase are tax-free. Unused room of up to $8,000 can generally be carried forward one year, so opening an account before year-end starts building room.

19. Tax-loss selling

If you hold non-registered investments with unrealized losses, selling them before year-end (allowing for settlement time) can offset capital gains realized this year. Beware the superficial loss rules if you or an affiliated person buy back the same investment within 30 days.

20. Check your personal instalments

If you take mostly dividends or have self-employment income, review whether you’ve made required personal tax instalments. The December 15 instalment is the last for the year.

21. Medical expenses and other credits

Consider timing medical expenses, which can be claimed for any 12-month period ending in the tax year, to maximize the credit. Gather receipts for medical, child care, and other deductible or creditable expenses now.

For sole proprietors and self-employed individuals

22. Review business-use-of-home expenses

Make sure you track the business portion of rent or mortgage interest, utilities, insurance, property taxes, and maintenance if you use part of your home regularly and exclusively for business, or as your principal place of business.

23. Track vehicle use

Keep a logbook to support the business-use percentage of your vehicle. The CRA accepts a full-year logbook or, after a base year has been established, a representative sample period with certain conditions.

24. Plan for CPP

Self-employed individuals pay both portions of CPP, 11.9% on net self-employment earnings up to the YMPE ($74,600 in 2026), plus 8% CPP2 on earnings between $74,600 and $85,000. Factor this into your cash planning for April 30.

25. Consider whether it’s time to incorporate

If your business profit consistently exceeds what you need to live on, it may be time to consider incorporation. Our guide to incorporating in Ontario walks through the decision.

Key dates to note

Frequently asked questions

How Solstice Partners can help

Solstice Partners works with business owners, incorporated professionals, and individuals across Toronto and the GTA on year-end tax planning, owner compensation strategy, corporate and personal tax filing, and the bookkeeping that makes informed planning possible.

Year-end planning appointments fill up quickly from November onward. Book a consultation with Solstice Partners now so we have time to review your numbers and act before the deadline.

This checklist provides general information based on 2026 federal figures and Ontario rules as of October 2026. It isn’t tax, legal, or financial advice for your specific situation. Some measures referenced depend on legislation and may change. Consult a qualified professional before making decisions.