Year-End Tax Planning for Individuals and Businesses

Introduction
Understanding year-end tax planning for individuals and businesses is essential for maximizing savings, reducing tax liability, optimizing deductions, managing cash flow, and ensuring full compliance with CRA and Revenu Québec. Waiting until tax season is too late — real tax savings happen before December 31 for individuals, and before year-end for corporations. Proper planning can reduce personal taxes, corporate taxes, GST/QST exposure, payroll liabilities, capital gains, and more. Whether you are an employee, self-employed, investor, landlord, or business owner, strategic year-end tax planning puts money back in your pocket. This guide covers the most important year-end tax planning strategies in Canada.

Legal and Regulatory Framework
Year-end tax planning for individuals and businesses is governed by the Income Tax Act, Québec’s Taxation Act, CRA administrative policies, RRSP and TFSA rules, corporate tax legislation, payroll rules, GST/HST and QST regulations, capital-gains rules, and deadlines for contributions and elections. CRA and ARQ enforce strict timelines; once December 31 passes, many tax opportunities disappear.

Key Year-End Planning Areas
income deferral
expense acceleration
capital gains planning
retirement-savings optimization
corporate tax deductions
remuneration planning
GST/QST planning
payroll adjustments
investment repositioning
These strategies help reduce overall tax burden.

Part 1 — Year-End Tax Planning for Individuals

RRSP Contributions
RRSPs remain one of the most effective tax planning tools. Although the RRSP deadline is 60 days into the new year, contributions should be evaluated before year-end to estimate tax savings. High-income earners benefit most.

TFSA Optimization
Before year-end, ensure you maximize TFSA contributions. Capital gains, dividends, and interest grow tax-free. Withdrawals made before December 31 restore contribution room in the following year.

Tax-Loss Harvesting
Selling investments at a loss before December 31 allows you to offset capital gains. Losses can offset current-year gains, prior-year gains, or be carried forward indefinitely. The superficial loss rule must be respected — repurchasing too quickly cancels the loss.

Capital Gains Planning
Individuals expecting large gains should consider:
timing of sales
donating securities to eliminate gains
transferring assets to a spouse strategically
ensuring adjusted cost base is correct
Capital gains are taxed at 50 percent inclusion in most cases.

Medical Expenses Timing
Medical expenses claimed on a tax return use a 12-month period ending in the tax year. Consider timing large expenses before year-end to maximize deductions.

Charitable Donations
Donations made before December 31 qualify for this year’s tax credit. Donating securities eliminates capital gains tax entirely.

Interest and Carrying Charges
Pay deductible investment-interest expenses before year-end. Organizing statements early ensures accurate reporting.

Family Tax Planning
Consider:
spousal RRSPs
income splitting with family members (where allowed)
RESP contributions for children
disability tax credit eligibility
These strategies reduce household tax burdens.

Rental Property Planning
Landlords should:
complete major repairs before year-end
review CCA claims
gather receipts and supporting documents
plan for capital improvements
Rental losses are allowed only if there is a reasonable expectation of profit.

Part 2 — Year-End Tax Planning for Businesses

Income Deferral
Corporations may defer invoicing or billing into the next fiscal year if cash flow and tax rules allow. Unbilled revenue must still be recognized under accrual accounting when earned.

Expense Acceleration
Businesses can reduce taxable income by:
purchasing equipment
paying bonuses before year-end
ordering supplies
paying year-end bills early
prepaying deductible expenses
However, expenses must be reasonable and incurred for business purposes.

Capital Cost Allowance (CCA) Planning
Corporations should review asset additions early. Under the half-year rule, assets acquired before year-end allow a partial CCA deduction. Strategic asset timing can reduce tax significantly.

Remuneration Strategy: Salary vs Dividends
The corporation-owner remuneration plan must be designed before year-end:
salary creates RRSP room and reduces corporate income
dividends may reduce payroll obligations
a mix often provides optimal tax planning
If the corporation needs to reduce taxable income, salary may be advantageous.

Shareholder Loan Review
Shareholder loans taken must be repaid within one year after fiscal year-end, or they may become taxable. Corporations must review shareholder loan balances before closing books.

Bad-Debt Write-Offs
Receivables that cannot be collected should be written off before year-end to claim the bad-debt deduction.

Inventory Count and Valuation
Businesses with inventory must conduct a physical count and adjust COGS and ending inventory. Inventory write-downs for obsolete or damaged goods can provide immediate tax relief.

GST/HST and QST Adjustments
Reconcile GST/HST and QST accounts before year-end:
ensure ITCs and ITRs are claimed
verify collected tax vs remitted amounts
correct any errors before filing
CRA and ARQ intensely audit GST/QST discrepancies.

Employee Bonuses and Payroll Adjustments
Bonuses must be paid within 180 days to be deductible. Payroll accuracy must be confirmed before T4 and RL-1 filings.
Review:
CPP/QPP
EI/QPIP
vacation accruals
expense reimbursements
year-end adjustments
Payroll errors result in penalties and employer audits.

Income Splitting Through a Corporation
Tax on split income (TOSI) rules restrict dividends to family members, but exemptions exist for:
excluded business
excluded shares
reasonable remuneration
Careful planning ensures TOSI compliance.

Owner-Manager Retirement Planning
Business owners should consider:
IPPs (Individual Pension Plans)
RCAs
corporate-owned investment strategies
These tools reduce corporate tax and support long-term retirement planning.

Purchase and Sale Timing
Businesses considering major purchases or disposals should evaluate year-end timing for tax advantages. Selling depreciated assets may trigger recapture; planning prevents unintended tax.

Loss Utilization
Corporations should apply:
non-capital losses
net capital losses
restricted farm losses
loss carryforwards
Losses expire after specific periods if unused.

Financing and Interest Deductions
Interest on business loans is deductible when properly documented. Review loan agreements, interest statements, and financing structures before year-end.

Recordkeeping and Documentation
Businesses must gather:
invoices
contracts
receipts
bank statements
payroll records
financial statements
CRA requires documentation to support deductions and tax planning positions.

Common Year-End Tax Planning Mistakes
waiting too late
incorrect CCA claims
unreconciled GST/QST accounts
misclassified expenses
forgetting to pay bonuses on time
neglecting shareholder loans
failing to document business purpose
These mistakes often trigger CRA or ARQ reassessments.

Key Court and CRA Positions
CRA requires that deductions and deferrals be supported by actual transactions. Courts consistently uphold CRA reassessments when businesses or individuals fail to document year-end strategies properly or attempt aggressive tax planning without substance.

Why CRA and Revenu Québec Audit Year-End Activity
highly fluctuating expenses
year-end spikes in deductions
inventory adjustments
salary/dividend anomalies
GST/QST mismatches
These are common risk indicators for tax authorities.

Mackisen Strategy
Mackisen CPA provides full year-end tax planning for individuals and businesses. We analyze your financial situation, reduce taxes legally, optimize RRSP and TFSA strategies, plan dividends and salary, correct GST/QST issues, optimize CCA, implement loss strategies, review payroll, and prepare your business for a smooth year-end filing. We ensure you maximize savings while remaining fully compliant.

Real Client Experience
A Montréal corporation reduced taxable income by advancing expenses and optimizing CCA. A self-employed consultant saved thousands through RRSP and tax-loss harvesting strategies. A family-owned business restructured year-end bonuses and dividends to reduce overall family tax. A real estate investor avoided recapture penalties through strategic timing of renovations.

Common Questions
When should year-end tax planning begin? Ideally in October–November.
Can I reduce taxes after year-end? Limited options — timing is critical.
Is RRSP or TFSA better? Depends on income level and goals.
Should owners take salary or dividends? It depends — often a mix.
Can last-minute donations help? Yes — if made before December 31.

Why Mackisen
With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps individuals and businesses master year-end tax planning for maximum savings, compliance, and financial efficiency. Our expert team ensures strategic planning, seamless execution, and complete audit protection.