Now that we’re approaching the end of the year, it’s time to review your business finances. We’ve highlighted the most critical tax-planning tips you need to know as a business owner.
Salary and Dividend Mix
As a business owner, one essential part of tax planning is determining the right mix of salary and dividends for both yourself and your family members. The following are the main options you can consider when determining how to distribute money from your business:
No matter what strategy you take to distribute money from your business, keep in mind the following:
An important part of year-end tax planning is determining appropriate ways to handle compensation. The following are the main things to consider:
One of the most common tax advantages available to Canadian-Controlled Private Corporations (CCPC) is the Small Business Deduction (SBD).
For qualifying businesses, the SBD reduces your corporate tax rate. Keep in mind that the SBD will be reduced by five dollars for every dollar of passive investment income over $50,000 your CCPC earned the previous year.
The best way to avoid losing any of the SBD is to make sure that the passive investment income within your associated corporation group does not exceed $50,000.
These are some of the ways you can make sure you preserve your access to the SBD:
Another tactic you should consider for year-end tax planning is to hasten your purchase of any depreciable assets. A depreciable asset is a type of capital property that you can claim the Capital Cost Allowance (CCA) on.
These are two of the best ways to make the most of tax planning with depreciable assets:
Another essential part of tax planning is to make all of your donations before year-end. This applies to both charitable donations and political contributions.
For charitable donations, you need to consider the best way to make your donations and the different tax advantages of each type of donation. For example, you can:
We can help walk you through the tax implications of each of these types of charitable donations.
Make the Most of Covid-19 Relief Programs
While some COVID-19 relief programs, such as the Canada Emergency Wage Subsidy (CEWS) and Canada Emergency Rent Subsidy (CERS) has ended, others are still available. See if your business can benefit from any of the following relief programs:
Get year-end tax planning help from someone you can trust!
We’re here to help you with your year-end tax planning. Book some time with us today to learn how you can benefit from these tax tips and strategies.