What to do before your corporation's year-end: an owner's checklist

Summary

Your corporation’s year-end is the date its financial year stops, and it was set when you incorporated. Everything in the year up to that date goes onto one corporate income tax return, called a T2. Most owner-managed corporations use December 31, though any date works so long as your first year runs no longer than 53 weeks.¹

Two calendars run at once, which is what makes a year-end checklist two lists rather than one. Decisions the corporation makes about its own money expire on your year-end date (e.g. buying a piece of equipment, or declaring a bonus to yourself before the year closes). Decisions about the tax you pay personally run on December 31 instead. You’re taxed on the calendar year even though your corporation isn’t. Take a dividend: the corporation can declare one on any day of its own year, but you pay the tax in the calendar year you receive it.

In our view the work belongs in two passes, not one session after the books are done. A planning pass, 60 to 90 days before your year-end, settles money you’ve already taken out, then how you’ll pay yourself, then anything you plan to buy. A compliance pass in the 60 days after year-end pays the tax, which falls due two or three months after year-end even though the return isn’t due for six.

For a single owner with a December 31 year-end and straightforward numbers, the planning pass can be a short conversation rather than a full session. It still has to happen before your year-end, because equipment purchases and bonus decisions can’t be made afterwards.

The deadlines your year-end date sets

Your T2, the corporation’s income tax return, is due six months after year-end, so June 30 for a December 31 year-end.² The money is due earlier, on what the Canada Revenue Agency (CRA) calls the balance-due day. That day falls two months after year-end, or three months for a Canadian-controlled private corporation, meaning a private company controlled by Canadian residents. Almost every owner-managed corporation gets the extra month. The conditions are that it claimed the low small business rate this year or last, and that last year’s taxable profit stayed inside the $500,000 limit, counting any other corporations you or your spouse control.³ For a December 31, 2026 year-end that means March 31, 2027. The few that don’t qualify pay by February 28, 2027, which is a Sunday, so Monday, March 1 is on time. Your corporation may also owe instalments, meaning payments toward a year’s tax made before that year is over, and our deadlines page covers those.

Paying late costs more than owners expect, and two separate charges apply. Interest on overdue corporate tax runs at the CRA’s prescribed rate, compounded daily. The CRA resets that rate every three months, and the current quarter’s figure is on our CRA interest rates page.⁴ Most business costs come off your profit, so a $1,000 expense really costs you about $900. Interest charged by the CRA doesn’t, because the Income Tax Act denies the deduction, so $1,000 of it costs your corporation the whole $1,000.⁵ Filing late is charged on top, at 5% of the tax still unpaid at the filing deadline, plus a further 1% of that same unpaid tax for every full month the return is late, up to twelve months.⁶ As such, if the cash isn’t there in June, file the return anyway. On $100,000 of unpaid tax and a return six months late, the filing penalty alone is $5,000 plus $6,000, or $11,000, and interest sits on top of that.

Money you take out of the corporation

Start with money that has already left. If you’ve taken cash out that nobody recorded as salary, that wasn’t a dividend, and wasn’t the corporation paying you back for a business cost you covered personally, then the corporation has lent you the money. Paying a personal credit card bill straight out of the corporate account is the usual example. That balance has to be repaid within one year after the end of the corporation’s tax year in which you took it, so money drawn in March 2026 has to be back by December 31, 2027 for a December 31, 2026 year-end. Miss the date, and the whole balance is added to your personal income for the year you took it and taxed at your personal rate, even though you never received it as pay.⁷ Declaring a dividend or a bonus and applying it against what you owe clears the balance without any cash moving, at the cost of real personal tax now. Our guide to the shareholder loan account covers the rest.

Then settle how you pay yourself, the largest recurring number in most owner-managed corporations. Salary comes off your corporation’s profit before its tax is worked out. A dividend doesn’t, because it’s paid out of money the corporation has already been taxed on. What a dividend skips is payroll altogether: no payroll account to open with the CRA, nothing withheld from each payment and remitted monthly, and no pension cost on either side.

Salary buys two things a dividend doesn’t. The first is room in an RRSP (a registered retirement savings account, where what you put in comes off your personal income) for the following year, at 18% of the salary paid. That room is capped, at $35,390 for 2027, which you reach at about $196,600 of salary.⁸ The second is credit toward your future CPP pension. What salary costs is both halves of the Canada Pension Plan, because you’re the employer and the employee at once. On 2026 earnings up to $74,600 that comes to $8,460.90 in total: $4,230.45 withheld from your pay, and $4,230.45 paid by the corporation on top of your salary. Earnings between $74,600 and $85,000 add a second layer, capped at $832 in total, again half from you and half from the corporation.⁹ All of it is real cash leaving the business and your own pocket.

A bonus is the pay decision that runs on the year-end date itself: declare it before year-end, pay it afterwards, and you can set the figure once you know the profit. A bonus is salary paid in a lump, so it goes through payroll when it’s actually paid, carries the same pension cost and withholding, and is taxed to you in the calendar year you receive it. What you gain is timing, because your corporation subtracts it from the earlier year’s profit. What comes with it is a deadline. If the bonus isn’t paid within 180 days of your year-end, the corporation can’t subtract it from that year’s profit at all, and the saving moves into the following year instead, which can undo a corporate tax bill you’d already planned around.¹⁰ For a December 31, 2026 year-end, that means paying it by June 29, 2027, one day before the T2 is due. The T4 and T5 slips reporting salary and dividends are due the last day of February after the calendar year the money was paid.¹¹

Buying equipment before year-end

Buying something is the year-end move owners ask about most, and two things are worth knowing first. A purchase only earns a deduction if the asset is available for use by your year-end, which can happen when equipment is delivered and ready for its intended function, before you actually start using it.¹² A truck ordered on December 28 and delivered on January 6 does nothing for the earlier year.

The second point is that the class and acquisition date decide whether equipment can be deducted all at once. A purchase goes into a class of similar assets, and you deduct a slice of the cost each year at that class’s rate, which the CRA calls capital cost allowance. Under the ordinary schedule, $60,000 of spending doesn’t all come off this year’s profit, though first-year incentives can change that result. What it saves in the first year is your corporate tax rate applied to that first slice, rather than to the price you paid. On profit inside the $500,000 limit, that rate has a federal part and a provincial part (in Ontario, 9% federal plus a provincial rate cut to 2.2% on July 1, 2026in British Columbia, 9% federal plus a 2% provincial rate for 2026in Alberta, 9% federal plus a 2% provincial rate for 2026in Saskatchewan, 9% federal plus a 1% provincial rate for 2026in Manitoba, 9% federal plus a 0% provincial rate for 2026in New Brunswick, 9% federal plus a 2.5% provincial rate for 2026in Nova Scotia, 9% federal plus a 1.5% provincial rate for 2026in Prince Edward Island, 9% federal plus a 1% provincial rate for 2026in Newfoundland and Labrador, 9% federal plus a 2% provincial rate for 2026), so ask us for your own figure before you size a purchase around it.¹³ For a few kinds of asset the first-year slice is much bigger than the ordinary schedule allows (e.g. computer hardware, which the rules deliberately single out). Finance’s proposed Productivity Mega Deduction would extend full first-year deductions to most eligible equipment acquired from September 15, 2026. It isn’t enacted as at September 25, so we’d check its status before choosing a delivery date around the existing schedule.

We’d buy the asset when the business actually needs it, rather than a month early for the deduction. The exception is a purchase you’d have made in January anyway: acquiring it and meeting the available-for-use test before your year-end pulls the deduction a full year earlier at no extra cost.

How often this changes

Run the whole checklist once a year, and bring the planning half forward if any of these happens:

Your corporation’s profit approaches or passes $500,000, since the three-month balance-due day depends on staying inside that limit.
You or your spouse incorporate a second business (e.g. a rental company). Where the CRA treats two corporations as associated, broadly where the same person or their spouse controls both, they share a single $500,000 limit instead of getting $500,000 each. Tell us before you set the second one up, not after.
Your corporation has a loss year, which inverts most of the advice above, because claiming capital cost allowance is optional and worth saving for a profitable year.

Closing thoughts

The tax you can move at a year-end is real but smaller than most owners hope, and the compliance you can get wrong is larger than most owners fear. The wider benefit of a tidy year-end is knowing what the business actually earned, and that number sits underneath what you pay yourself, whether you hire, and whether your prices are right.

How we handle it

We run the planning pass on your numbers 60 to 90 days before your year-end, and the compliance pass after it, in one file. Between them they cover your shareholder loan position, the salary and dividend figures, the balance paid on the balance-due day, and the T2 filed on time. The owner’s personal return is prepared alongside the corporate one, and year-end planning sits inside our tax planning and advice work.

A corporation’s tax year is its fiscal period, and no fiscal period can run longer than 53 weeks (subsection 249.1(1) of the Income Tax Act). Changing the date later requires the CRA’s concurrence under subsection 249.1(7) of that Act. Both points are set out on the CRA page “Determining your corporation’s tax year”. Verified 2026-08-09. ↩
Six months from the end of the tax year, under paragraph 150(1)(a) of the Income Tax Act. Where the year-end falls on the last day of a month, the return is due the last day of the sixth month after it. Source is the CRA page “When to file your corporation income tax return”. Verified 2026-08-09. ↩
The two-month default and the three-month extension both come from the definition of “balance-due day” in subsection 248(1), paragraph (d), of the Income Tax Act. Paragraph (d)(i) sets three conditions: a deduction under section 125 (the small business deduction) claimed in the current or the preceding year, Canadian-controlled private corporation status throughout the current year, and prior-year taxable income not above the business limit. Taxable income is aggregated across associated corporations, so a second company can cost you the extra month. The CRA restates the conditions on “Corporation payments: instalment dates and balance-due day”, and accepts payment on the next business day where the balance-due day is a weekend or a public holiday. The federal business limit is $500,000 under subsection 125(2), and several provinces set a higher limit for their own rate, with the CRA’s corporation tax rates page giving Nova Scotia $700,000 and both PEI and Saskatchewan $600,000. Verified 2026-08-09. ↩
Canada Revenue Agency, “Prescribed interest rates” (https://www.canada.ca/en/revenue-agency/services/tax/prescribed-interest-rates.html), the CRA’s index of quarterly rate pages. The rate on overdue corporate tax is reset every calendar quarter under section 4301 of the Income Tax Regulations. Interest under subsection 161(1) of the Income Tax Act compounds daily by operation of subsection 248(11). Every published quarter is stated on our CRA interest rates page, with each quarter’s CRA page as its source. That page owns the figure, and this guide states no rate of its own. Verified 2026-09-06. ↩
Interest payable to the CRA under the Income Tax Act is denied as a deduction by paragraph 18(1)(t) of that Act. Verified 2026-08-09. ↩
The late-filing penalty is 5% of the unpaid tax plus 1% per complete month, to a maximum of twelve months, under subsection 162(1) of the Income Tax Act. A repeat-offender rate of 10% plus 2% a month applies under subsection 162(2), where the CRA has demanded the return under subsection 150(2) and charged a failure-to-file penalty in any of the three previous tax years. The CRA restates both of those penalties on its page “Corporation payments: avoiding penalties”. Verified 2026-08-09. ↩
Income Tax Act, subsection 15(2), which includes the amount of the loan in the income of the person who received it, with no offsetting deduction for the corporation. Subsection 15(2.6) provides the exception used here, and runs the one-year window from the end of the lender’s taxation year rather than from the date of the loan. The repayment also has to sit outside a series of loans or other transactions and repayments, so clearing a balance and immediately re-borrowing will not qualify. A separate deemed-interest benefit applies while the balance is outstanding, and is covered in the shareholder loan account guide rather than here. Verified 2026-08-09. ↩
RRSP room for a year is the lesser of 18% of the previous year’s earned income and the RRSP dollar limit for that year, reduced by any pension adjustment where the corporation also runs a registered pension plan. The limit is $33,810 for 2026 and $35,390 for 2027, from the CRA table “MP, DB, RRSP, DPSP, ALDA and TFSA limits and the YMPE”. Salary paid in 2026 creates 2027 room, so the ceiling on it is $35,390, which 18% reaches at about $196,600 of salary. Dividends are not earned income, so they create no RRSP room at all. Verified 2026-08-09. ↩
For 2026 the year’s maximum pensionable earnings are $74,600, the basic exemption is $3,500 and the rate is 5.95% each side, which gives $4,230.45 per side and $8,460.90 for both. A second layer, CPP2, runs at 4% each side on earnings between $74,600 and $85,000, capped at $416 per side and $832 for both, so an owner paid above $74,600 adds that on top. Figures come from the CRA pages “CPP contribution rates, maximums and exemptions” and “Second additional CPP contribution (CPP2) rates and maximums”. Verified 2026-08-09. ↩
Income Tax Act, subsection 78(4), under which an amount unpaid on the 180th day after the end of the year is treated as not having been incurred in that year, and is deductible only when it is paid. Reasonable vacation and holiday pay and salary deferral arrangements are carved out. Verified 2026-08-09. ↩
The filing date is the last day of February following the calendar year, under subsection 205(1) of the Income Tax Regulations. Where that day falls on a weekend or a recognised holiday the next business day applies, and for 2025 slips the CRA gave March 2, 2026, on its page “When to file information returns”. February 28, 2027 falls on a Sunday, so the 2026 slips should be due on Monday, March 1, 2027 on the same basis. Where fewer than 51 information returns are filed, the late penalty is the greater of $100 and $10 a day to a maximum of 100 days, so $1,000 at most, under paragraph 162(7.01)(a) of the Income Tax Act. Verified 2026-08-09. ↩
The available-for-use rules sit in subsections 13(26) to 13(32) of the Income Tax Act. Equipment uses the earliest applicable trigger: first income-earning use, delivery plus capability to perform its intended function, the rolling-start rule or immediately before disposition. CRA Income Tax Folio S3-F4-C1 paragraph 1.34 confirms that actual use need not have started. Rechecked 2026-09-25. Capital cost allowance itself is claimed class by class, at each class’s rate, and the claim is optional in any year. Discussion is in CRA Income Tax Folio S3-F4-C1, “General Discussion of Capital Cost Allowance”. Verified 2026-08-09. ↩
The federal rate on active business income eligible for the small business deduction is 9% for 2026, on the first $500,000, from the CRA page “Corporation tax rates”. Verified 2026-08-09. For Ontario: Ontario Ministry of Finance, Corporations Tax: Corporate Income Tax (ontario.ca), corroborated by 2026 Ontario Budget - Annex: Details of Tax Measures (budget.ontario.ca/2026/annex.html) and Bill 97 status page (ola.org). Verified 2026-08-13. The rate reduction is prorated for taxation years straddling July 1, 2026 (Ontario 2026 Budget annex: 'The tax rate reduction would be prorated for taxation years straddling July 1, 2026.'). Enacted by Bill 97, Plan to Protect Ontario Act (Budget Measures), 2026, S.O. 2026, c. 2, which amends s. 31(4) of the Taxation Act, 2007 so the small business deduction rate is 9.3% for days in a taxation year after June 30, 2026 (11.5% general rate minus 9.3% = 2.2%).For British Columbia: Province of British Columbia (Ministry of Finance), Corporate income tax rates – Province of British Columbia. Verified 2026-08-13. Rate of 2% effective April 1, 2017, and a business limit of $500,000 effective January 1, 2010. Budget 2026 (tabled February 17, 2026) announced no corporate income tax rate changes.For Alberta: Government of Alberta - Treasury Board and Finance / Tax and Revenue Administration, Tax, levy, and prescribed interest rates. Verified 2026-08-13. The current-rates table on the issuer page lists 2% with effective date July 1, 2020 (the rate has been 2% since 2017, and July 1, 2020 is the current table row). Alberta Budget 2026 (tabled 2026-02-26) made no corporate rate changes. The issuer rate table loaded 2026-08-13 shows no pending 2026 change.For Saskatchewan: The Income Tax Act, 2000, c I-2.01 (Saskatchewan), King's Printer consolidation, The Income Tax Act, 2000, s. 56(2) - Rates of tax. Verified 2026-08-13. Rate history in s. 56(2): 2% to Sept 30 2020, then 0% Oct 1 2020 - Jun 30 2023, then 1% from Jul 1 2023 with no end date. The 2026-27 budget (tabled March 18, 2026) makes no change: budget.saskatchewan.ca/economy states the budget is "maintaining the small business tax rate at one per cent".For Manitoba: Manitoba Finance, Corporate Income Taxes - Province of Manitoba. Verified 2026-08-13. Budget 2026 (tabled March 24, 2026, Information Bulletin 126) announced no corporate income tax rate changes, so 0% holds for all of 2026.For New Brunswick: New Brunswick Income Tax Act, S.N.B. 2000, c. N-6.001 (official consolidation, laws.gnb.ca), corroborated by NB Department of Finance and Treasury Board corporate tax page, New Brunswick Income Tax Act (consolidated), s.57(1)(a) and s.57(1.025). Verified 2026-08-13.For Nova Scotia: Nova Scotia Department of Finance and Treasury Board (novascotia.ca), Corporate income tax rates - Government of Nova Scotia. Verified 2026-08-13. The cut from 2.5% to 1.5% is applied on a days-prorated basis for taxation years straddling April 1, 2025 (NS Income Tax Act s. 40(2) formula, and CRA Schedule 346 Part 3 prorates 2.5% for days before April 1, 2025 and 1.5% after March 31, 2025). Budget 2026-27 (novascotia.ca/budget) keeps the rate at 1.5% - no 2026 change.For Prince Edward Island: PEI Department of Finance and Affordability, and the Income Tax Act, R.S.P.E.I. 1988, Cap. I-1, Provincial Corporate Income Taxes | Government of Prince Edward Island. Verified 2026-08-13. The 1% rate has applied since January 1, 2022 and was left unchanged by the July 1, 2025 package (which changed the general rate and threshold) and by Budget 2026. Statutory basis: Income Tax Act (PEI) s. 37.11.6 (years beginning on or after 2022-01-01 and ending before 2025-07-01) and s. 37.11.7 (years beginning on or after 2025-07-01), factor A = 1.0% in both.For Newfoundland and Labrador: Income Tax Act, 2000, SNL 2000 c I-1.1, s. 40(3) (as amended by 2026 c14 s4), announced in Government of Newfoundland and Labrador Budget 2026, Income Tax Act, 2000 (consolidated), House of Assembly of Newfoundland and Labrador, and the Budget 2026 News Release. Verified 2026-08-13. Announced in Budget 2026 (tabled April 29, 2026) retroactive to January 1, 2026, and already enacted: the consolidated statute's s. 40(3) reads 2% with amendment citation 2026 c14 s4. Section 40(4) prorates straddle years by days: 2.5% for days before January 1, 2026 and 2% for days after December 31, 2025. Budget 2026 also announced further cuts to 1.5% on January 1, 2027 and 1% on January 1, 2028, but those steps are NOT yet in the consolidated statute (no 1.5%/1% text found). The Finance department's Corporate Income Tax web page still showed 2.5% when loaded on 2026-08-13 - that page lags the statute. ↩

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