Economical Annual Bookkeeping for Canadian Businesses

Divide the total by one plus the tax rate expressed as a decimal. That gives the amount before tax, and subtracting it from the total leaves the tax portion. Going the other direction, multiply the pre-tax amount by the rate to get the tax and add the two together. Use the combined rate for the province of supply, and avoid rounding at each step so the tax you report matches the figures on your invoices.

No. Capital is the owner's stake in the business, so it sits in equity, not liabilities. On a balance sheet, assets equal liabilities plus equity, and the capital account belongs on the equity side alongside retained earnings. Money the owner lends the business is different, because the business owes it back, and that is a liability. Keeping owner capital, owner loans and drawings in separate accounts prevents a messy reconciliation at year end.

No. Insurance premiums are an exempt financial service, so no GST/HST appears on them and there is no input tax credit to claim. Provinces levy their own taxes on certain premiums, and Ontario applies retail sales tax to some group benefit and insurance premiums, which is why an invoice can still show a tax line. The premium itself stays deductible as a business expense where the coverage relates to earning income.

If you owe nothing, there is no late-filing penalty, but benefits and credits can be delayed. If you owe, the penalty is 5% of the unpaid balance plus 1% for each full month the return is late, to a maximum of 12 months. Interest also runs on the balance from the day after it was due. Repeat late filers who receive a formal demand face a higher penalty. File as soon as you can, even if you cannot pay.

You cannot write off the income itself, but you deduct the costs of earning it. Common current expenses are mortgage interest (not principal), property tax, insurance, utilities you pay, condo fees, advertising, property management, and repairs that maintain the property. Improvements that better the property are capital and depreciated instead. Only the rented portion counts where you also live there. Keep invoices for six years from the end of the tax year they relate to.

You claim a refund by filing a T1 return; there is no separate refund application. File electronically using tax software the CRA has approved for NETFILE. For the 2025 tax year online filing opened 23 February 2026 and closes 29 January 2027. Register direct deposit in CRA My Account so the money reaches your bank. Online returns are usually processed in about two weeks. To fix a return already filed, use a T1-ADJ or the CRA change-my-return service.

It stays out of taxable income but often counts elsewhere. Amounts such as most lottery winnings and income earned inside a TFSA are not taxed at all. Some other receipts are exempt from tax yet still have to be reported, because the CRA uses net income and family net income to test benefits and credits. So an amount that costs you no tax can still reduce a benefit. Lenders and landlords apply their own definitions again.

Double taxation is lawful, and relief comes through credits and treaties rather than exemption. A Canadian resident taxed abroad on foreign income normally claims a foreign tax credit, while Canada's tax treaties cap withholding and decide which country taxes first. Inside Canada, corporate profits paid out as dividends carry a gross-up and dividend tax credit so the combined burden approximates a single level of tax. US LLCs are a common trap, since Canada usually treats one as a corporation.

Balance owing is what you still have to pay after your return is assessed: tax for the year less the tax already withheld, instalments paid and refundable credits. A positive balance means money is due. A credit balance, usually shown with a minus sign, means you overpaid and a refund or transfer is coming. Your notice of assessment shows the balance as assessed, and My Account shows it updated for interest and payments received.

Dental treatment by a dentist, orthodontist or dental hygienist is an eligible medical expense, covering fillings, extractions, dentures and orthodontic work needed for health reasons. Purely cosmetic procedures such as whitening are excluded. Claim what you actually paid after any plan reimbursement, and remember that premiums for a private dental plan are themselves eligible. Only expenses above an income-based floor convert into a credit on the T1.

Yes. When wait times are long the CRA phone system offers an automated callback: you enter a number, hang up, and an agent calls when your place in the queue comes up. The option only appears while the queue is long, so a quiet line will simply connect you. An agent working an open file can also arrange a return call. Keep the number you gave free, and expect the call from a CRA line rather than the one you dialled.

Interest on a student line of credit or an ordinary bank loan cannot be claimed. The student loan interest credit applies only to interest on loans issued under the Canada Student Loans Act, the Canada Student Financial Assistance Act, a provincial or territorial student loan programme or similar legislation. A line of credit stays ineligible even where the money went to tuition, and rolling a government loan into a line of credit ends eligibility permanently.