Pocket-Friendly Bookkeeping for Professional Corporations

A tax deduction is an amount subtracted from your income before tax is worked out, so it reduces the income being taxed rather than the tax bill directly. Its worth depends on your marginal rate: the higher the rate, the more the deduction saves. Common examples are RRSP contributions, child care costs, union dues, moving expenses and business expenses. Credits work the other way, reducing the tax calculated on that income.

A TD1 Personal Tax Credits Return tells your employer which personal credits to build into your income tax withholding, so the right amount comes off each pay. You normally complete a federal TD1 and a provincial or territorial TD1 when you start a job. File a fresh pair whenever your situation changes, for instance a new dependant, tuition, or a second employer, where you should not claim the basic personal amount twice.

Those are American terms. The Canadian equivalent is the personal tax credits return you complete for an employer, claiming the federal and provincial basic personal amount plus any other credits you qualify for, such as tuition or the disability amount. Your employer uses it to set the tax withheld from each paycheque. The federal basic personal amount for 2026 is $16,452, tapering to $14,829 as net income runs from $181,440 to $258,482.

No. GST/HST you charge is tax you collect for the government, so a registrant keeps it out of revenue and reports it on the GST/HST return, claiming input tax credits against it. Report your sales net of the tax on your T2125 or T2. If you are not registered you charge no GST/HST, and the tax you pay on your own purchases is simply part of the cost of each deductible expense.

Yes. In bookkeeping terms rent received is revenue, recognised as it is earned; on a personal return it is reported as gross rental income before expenses, and in a corporation it sits in revenue on the income statement. The distinction that matters for tax is property income versus business income: a straightforward rental with few services is property income, while substantial services can make it business income, which changes how CPP and the small business deduction apply.

Income tax on individuals, corporations and trusts; consumption taxes, where GST is 5% and provinces add HST, PST, QST or RST; payroll levies such as CPP and EI; property tax charged by municipalities; and targeted charges including excise duties and land transfer tax. Capital gains sit inside income tax, with one-half of the gain included for 2025 and 2026. Federal, provincial and municipal governments each levy their own, which is why rates differ by province.

No. Age creates no exemption. Income tax is withheld from a young worker’s pay in the usual way, though many earn less than the basic personal amount and recover the withheld tax by filing a return. EI premiums apply at any age. CPP contributions begin with the month after the worker turns 18, so no CPP comes off before then. Filing anyway is worth it, because earned income builds RRSP room for later.

Employer-paid premiums for a private health or dental plan are generally not a taxable benefit for federal income tax, so they stay out of the employee's income. Quebec treats them as a taxable benefit for provincial purposes. Employer-paid life insurance premiums are taxable everywhere. If the employer simply reimburses dental bills outside a qualifying plan, the treatment can change, so check the CRA's employers' guide to benefits and allowances before setting the plan up.

No. QST is a separate Quebec tax administered by Revenu Quebec, and it cannot be recovered on your federal GST/HST return. Only a business registered for QST can claim input tax refunds for the 9.975% QST it pays, and registration normally follows from making taxable supplies in Quebec. An Ontario business with no QST registration treats the QST on a Quebec invoice as part of the cost of the expense. Check Revenu Quebec for the registration rules.

Usually not. Most financial services, including account maintenance, interest, loan arrangement and transfers of money, are exempt supplies, so no GST/HST is charged and the bank claims no credits on them. Some charges billed on the same statement are taxable: safety deposit box rental, certain administrative or advisory services, equipment rental and merchant processing hardware. Read the statement, since taxable lines show the tax separately, and claim input tax credits only on those.

By 31 December of the year the annuitant turns 71, which is still the rule for 2026. Before that date you convert the RRSP to a RRIF, buy an annuity, or take the money out as taxable income, and most people choose a RRIF. Contributions to your own RRSP stop at the same deadline, but you can keep contributing to a spousal RRSP until 31 December of the year your spouse or common-law partner turns 71.

Most lottery and casual gambling winnings, gifts and inheritances, GST/HST credit and Canada Child Benefit payments, TFSA growth and withdrawals, and life insurance death benefits are not taxable. Some non-taxable items still need a line on the return: the sale of a principal residence must be reported even when the whole gain is exempt, and workers' compensation and social assistance are reported and then deducted. When you are unsure, report the amount and claim the offset.