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End of Year Tax Tips for Small Businesses

Are you a small business owner? Are you wondering how you can best approach the end of this year when it comes to your finances? We’ve compiled our best end-of-year tax tips that will ensure you finish off this year (and start the new one) with your best financial foot forward.

Defer End-Of-Year Income to the Following Year

First and foremost, you can strategically defer income to the following year in order to lower this year’s net income amount. Shift income that you expect to receive around the holidays to January 1st or later to avoid that income amount from being added to the current year’s bottom line, and thereby delay it from being counted until the following year. This makes for a particularly wise choice when tax rates are set to be reduced in the following tax year.

Get New Office Equipment and Stock Up On Office Supplies

If you plan on replacing office equipment or will be needing to stock up on office supplies early in the New Year, we suggest making these purchases before the year is over instead in order to maximize your year’s deductions.

When taking this course of action, you’ll usually only be able to claim 50% of the value of most new assets, which is referred to as the half-year rule. This will, however, still allow you to increase your Capital Cost Allowance for the current tax year while setting up your small business for a higher CCA claim for the following tax year.

Keep Depreciable Assets Until Next Year

If your small business has depreciating assets you’ve been meaning to dispose of, hold off on that task until next year – this will avoid an inadvertent reduction of your Capital Cost Allowance Claim for the current tax year.

Make Your Maximum RRSP Contributions

If your small business is a sole proprietorship or partnership with a steady income, you can utilize RRSPs as a functional way to reduce your taxes while saving for retirement. Nearing the end of the year, ensure you’ve contributed your maximum allowable 18% of your income to your RRSP, which will be deducted straight from your income.

Open a Tax-Free Savings Account

If you are in a lower income bracket, you may want to consider opening a tax-free savings account (TFSA) before the end of the year. The funds in a TFSA account are not tax deductible, but they are tax-free.

You can therefore open up a TFSA account before the New Year, and contribute up to $5000 for the entirety of the current tax year, helping you to save on taxable income. With greater flexibility than RRSP contributions, TFSA funds can be withdrawn at any time.

Run an Inventory Check for Market Deductions

If the market value of your inventory has declined, this may make way for additional deductions on your year’s taxes. Be sure to run an inventory check and account for any shifts in market value on this year’s taxes.

Give to a Charitable Cause

There’s no better time than the holidays to give back and help out a charitable cause, so why not take advantage of that while also benefiting the financial state of your small business? As long as you get proper documentation reflecting the charitable donation, you can deduct this amount from your taxes this year.

Side note: you don’t have to donate money only! Your small business can also donate items like clothes, toys, and nonperishable foods, while deducting the fair market value of these items. 

We hope these end-of-year tax tips will contribute to a relaxed holiday season and a happy new year for you and your small business!


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