2017 year-end tax planning Tax planning for business owners

November 22, 2017 | Colleen O’ Connell-Campbell


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If you own a business, you may want to consider the following strategies.

Consider an Individual Pension Plan

If your business is incorporated, as a shareholder and an employee of your business, you have the option of considering an Individual Pension Plan (IPP) as a method of saving for retirement. An IPP is a defined benefit registered pension plan, similar to many large company sponsored plans, except it is established and sponsored by your company and designed for you as the only member. IPP’s generally have only one plan member except certain family member may also participate if they are employees of the company.

In order to establish a plan you must receive employment income from your company which is reported on a T4 slip. An IPP is most suitable for those who have significant T4 income and are at least forty years of age.

If your company if incorporated and you are looking for both year-end corporate income tax deductions and a structured retirement savings plan for yourself, consider establishing an IPP.

Pay salaries before year-end

If you operate your own business, consider paying reasonable salaries to yourself and family members who work in the business, before year-end. This year-end payment constitutes earned income which increases RRSP) contribution room for the following year. The payment will also give your business a tax deduction in the current year. The salary paid must be reasonable based on the services performed by your family member. A good rule of thumb is to pay your family member what you would pay someone who isn’t related to you.

Declare bonuses before year-end

If your business is incorporated and you require income from your corporation, consider declaring a bonus before the end of your corporation’s tax year and pay the amount no later than 180 days after the corporation’s year-end. Assuming your corporation’s year-end is December 31st, 2017 it will get a tax deduction for 2017 and the tax you will have to pay on the bonus will be deferred if you receive it at the beginning of 2018.

Shareholders loans

If your business is incorporated and the corporation loaned you money, ensure that the loan is repaid before the end of the corporation’s tax year after the year the loan was granted to avoid having to include the value of the loan as income on your personal tax return.

Purchase assets for your business

If you intend on purchasing assets for your business (i.e., a computer, furniture, equipment, etc.), consider making this purchase before year-end. If the asset is available for use, this year-end purchase will allow your business to claim depreciation on the asset for tax purposes. However, generally only half of the regular allowable depreciation can be claimed for tax purposes in the first year of an asset purchase.

This article covers some common individual tax planning strategies that you may want to consider before year-end. Speak with your qualified tax advisor to determine if any of these strategies are suitable for you in your circumstances.

This article may contain strategies, not all of which will apply to your particular financial circumstances. The information in this article is not intended to provide legal or tax advice. To ensure that your own circumstances have been properly considered and that action is taken based on the latest information available, you should obtain professional advice from a qualified tax and/or legal advisor before acting on any information in this article.

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