Deductions to Claim Before Year-End

What if you could cut your tax bill by thousands of dollars before December 31? You can—if you act now. Most small business owners wait until spring to think about taxes, and that delay costs real money. The purchases you make, expenses you accelerate, and deductions you claim before year-end can dramatically reduce your taxable income.

For Canadian-controlled private corporations (CCPCs), the opportunity is even greater. The small business deduction lowers the federal tax rate to 9% on the first $500,000 of active income—compared to the general 15% rate. Combined with provincial rates, total tax can drop to around 10–12%. Missing year-end planning means leaving that advantage on the table.

Capture Every Deduction You've Earned

The CRA’s rule is simple: if you spent money to earn business income, it’s probably deductible. Yet many owners miss out by not tracking or acting in time.

Office supplies and software are easy wins. Items like printer ink, folders, or cloud tools such as QuickBooks, Microsoft 365, Zoom, and Google Workspace all count. Spending $45 a month on QuickBooks and $15 on Zoom equals $720 a year in deductions—plus office supplies, that’s $1,100 saved, or about $275 back at a 25% tax rate.

Professional fees—accounting, legal, bookkeeping, and consulting—are fully deductible. Paying $2,500 for accounting and $1,200 for legal review means $3,700 in deductions, saving over $1,000 in taxes at a 30% rate.

Advertising and marketing costs—social media ads, websites, domains, print materials, or freelancers—can add up fast. Spending $5,700 on these areas can trim nearly $1,600 off your tax bill. Don’t forget shipping and delivery, from postage to courier costs, all deductible if business-related.

Reduce Taxable Income before December 31

The key is timing. You must spend or incur the expense before your fiscal year ends.

Buy equipment early. If you were planning to purchase office furniture, computers, or machinery in January, do it now. Assets available for use before year-end qualify for capital cost allowance (CCA). A $2,000 laptop gives you a $550 deduction this year and larger write-offs later.

Accelerate upcoming expenses. If you’ll need inventory, repairs, or annual subscriptions soon, pay for them now. A $3,500 storefront repaint done in December instead of February saves about $945 at a 27% tax rate. But be careful: prepaid multi-year contracts must be spread over the service period.

Write off bad debts. If a client owes you money that’s clearly uncollectible, claim it now. A $4,200 bad debt saves about $1,200 at a 29% rate and cleans up your books.

Defer income strategically. If your income will drop next year, push some invoicing to January to move the tax liability forward. A $10,000 project completed mid-December could be invoiced on December 30 so payment lands next year—but only if your tax rate will stay the same or fall. Otherwise, recognize income this year to pay at the lower rate.

Key Deductions to Review

Home office expenses can yield major savings. If your 300-square-foot office takes up 15% of your 2,000-square-foot home, you can deduct 15% of related costs like mortgage interest, utilities, and insurance. On $22,800 in total home expenses, that’s $3,420 deductible. Office furniture and computers qualify for CCA.

Vehicle expenses—fuel, insurance, maintenance, and lease or loan costs—are deductible for business use. If 60% of your 30,000 km driven is for business, you can deduct 60% of your $8,500 total costs, or $5,100. Keep detailed mileage logs to satisfy the CRA.

Meals and entertainment are 50% deductible if for legitimate business purposes. Track who you met and why. Spending $2,400 on client meals gives a $1,200 deduction, saving about $300 at a 26% tax rate.

Employee wages and benefits are fully deductible, including CPP and EI contributions. Paying $150,000 in wages plus $8,500 in payroll contributions yields $158,500 in deductions. Sole proprietors, however, can’t deduct wages paid to themselves.

Rent and property taxes for business premises are 100% deductible, saving nearly $8,700 on $30,000 in annual rent at a 29% tax rate. Likewise, telephone, utilities, and insurance used for business qualify, from internet and electricity to liability or property coverage.

Supplies vs. capital assets: consumables like cleaning products or materials are fully deductible this year; durable items like equipment must be depreciated over time.

Simple Year-End Strategies that Work

Contribute to your RRSP early. RRSP contributions reduce taxable income dollar-for-dollar. A $10,000 contribution saves $3,100 at a 31% rate—while improving your cash flow plan.

Review inventory. Write off damaged, lost, or obsolete stock before December 31 to reduce taxable income. An $8,000 write-off saves about $2,200 in taxes.

Check your sales tax filings. Ensure your GST/HST/PST records match what you’ve remitted. Fixing discrepancies now prevents CRA headaches later.

Pay outstanding bills. Deductions apply when you pay, not when billed. Paying that $2,800 accounting invoice in December instead of January means you can deduct it this year.

Prepare contractor slips and records. Ensure all T4A/1099s and contact info are complete before February deadlines. Clean records prevent penalties.

Donate before year-end. A $1,000 charitable donation earns roughly a $300 tax credit, depending on your rate.

What the CRA Watches Closely

Avoid overreaching. Personal expenses aren’t deductible. Only claim the business-use portion of vehicles, homes, or phones. Salaries paid to yourself as a sole proprietor don’t count, and capital assets must be depreciated—not deducted fully in year one. Likewise, prepaid multi-year contracts and fines or penalties are not deductible.

A $25,000 piece of equipment, for example, yields a $2,500 first-year deduction (not $25,000) using CCA Class 8. The CRA expects proper records and consistency, so accuracy matters.

Get Your Books in Order Now

The next six weeks determine how smooth your tax season will be. Reconcile your bank and credit card accounts, ensuring transactions match deposits and fees. Gather all receipts—digital copies are valid—and organize them by category. Update your mileage log using apps like MileIQ or Driversnote.

Send reminders for unpaid invoices, pay bills that make sense to settle, and verify payroll accuracy. Even small discrepancies between CPP, EI, and remittances can trigger audits.

Meet with your Accountant Early

Book your accountant meeting by mid-December—not during the holiday rush. They can help you decide whether to advance equipment purchases, defer income, or adjust installment payments. They’ll also check if your CCPC qualifies for the small business deduction, which lowers the federal rate to 9% on up to $500,000 of active income, with total tax as low as 10–12%.

If your taxable capital exceeds $10 million or your passive income surpasses $50,000, this deduction phases out—your accountant can plan around that. They can also ensure your installment payments are accurate so you avoid penalties and preserve cash flow.

Don't Wait Until Spring

Every opportunity expires on December 31. You can’t retroactively claim deductions or write off bad debts later. A laptop purchased January 5 counts for next year, not this one. Acting now means you’ll enter 2026 organized, compliant, and with more money left in your business.

Your Year-End Action Plan

Block off three hours this week to review your books.

1. List expenses or purchases to accelerate before December 31.

2. Collect unpaid invoices and write off bad debts.

3. Decide whether to defer or accelerate income.

4. Book your accountant meeting by mid-December.

5. Update your statements and compare results to last year.

The year-end deadline isn’t just a date—it’s the last opportunity to claim every deduction you’ve earned and set yourself up for a stronger 2026. Take it seriously, and you’ll save thousands. ||