December 31 is the deadline for several important tax-management decisions. Don't lose these opportunities to keep your money in your own pocket.
The standard personal strategies in year-end tax planning are simple. First, defer income and taxable capital gains until the next tax year. Second, bring anticipated tax-deductible expenses and capital losses into this tax year.
Business Owner Strategies
Depreciable Assets (Machinery and Equipment)
Delay selling until the new fiscal year. This lets you claim another year of capital cost allowance (CCA). Alternatively, if you are in the market for depreciable assets, buy them before your fiscal year-end to increase your CCA claim by half of the annual rate in the year the item is acquired.
Salaries And Wages For Family Members
Pay reasonable salaries to a lower-income spouse or child who works in the business to take advantage of income splitting opportunities.
- Determine the optimal salary/dividend mix for you and other family members.
- Accrue salary and bonuses before the year-end of the business.
- Make tax-effective cash withdrawals from your corporation (e.g., by paying dividends, tax-free capital dividends or paying down shareholder loans owed to you by the corporation).
You can sometimes arrange with your employer to receive the bonus early in the new year rather than at year-end.
Gifts And Awards
Since January 2001, all employees have been eligible for two non-cash gifts or awards per year totaling no more than $500. Such non-cash gifts (gift certificates are considered cash) are deductible for the employer but not taxable in the hands of the employee. If the gifts exceed $500 (including all applicable taxes such as GST, HST and PST), the entire amount is considered a taxable benefit - not just the amount that exceeds $500.
These are a few examples of general tax planning strategies. For a detailed review of your specific tax situation, be sure to talk to us about an advanced tax planning analysis, 1-800-265-1002.