Budget-Friendly Professional Corporation Tax Planning for Canadian Businesses

A T4E is the statement of Employment Insurance and other benefits. Service Canada issues one for each year in which EI was paid, covering regular, sickness, maternity, parental, caregiving or fishing benefits, and it shows the total received, the income tax already withheld and any amount to be repaid. Those figures go on the personal return for that year. Benefits paid under a different program come on their own slip.

Start by claiming everything you are entitled to: RRSP contributions, child care, moving and employment expenses, self-employment costs, tuition, medical expenses, donations and the credits that follow your family situation. Timing helps too, such as deferring a bonus or triggering a capital loss against a gain. Pension income splitting and spousal RRSP contributions move income to a lower-rate spouse. For a business, incorporating and planning how money is drawn out matters. Leaving income unreported is evasion, not planning.

Claim every genuine business expense and keep the paperwork, then use the structural levers rather than guesswork. A corporation pays the federal small business rate of 9% on the first $500,000 of active business income for 2026 instead of personal rates, so leaving profit inside the company defers tax until you draw it. Time purchases and income around the year end, pay a reasonable salary to create RRSP room, and split income only where the rules truly allow it.

There is no single definition. For tax the test that matters is the small business deduction: a Canadian-controlled private corporation earning active business income claims the lower rate on the first $500,000 of it for 2026, shared across associated corporations. Federally that limit falls by $5 for every $1 of adjusted aggregate investment income above $50,000 and is gone at $150,000, while Ontario keeps the full $500,000. Grant and lending programs use their own headcount or revenue tests.

Rental profit is taxed as ordinary income at your marginal rate; there is no special landlord rate. You report gross rent and deduct current expenses such as mortgage interest, property tax, insurance, utilities, repairs, advertising, condo fees and reasonable management costs. Capital improvements are added to the property's cost rather than deducted. A rental loss can generally offset other income. On sale, the gain is a capital gain, half of which is taxable for 2025 and 2026.

For individuals the tax year is the calendar year, January through December. For the 2025 year, online filing opened 23 February 2026 and the filing and payment deadline was 30 April 2026; if you or your spouse were self-employed, filing ran to 15 June 2026 but payment was still due 30 April 2026. A corporation picks its own fiscal year end instead, with the T2 due six months after that date.

Close the books for the fiscal year, prepare financial statements, then file a T2 return with the CRA for that year end within six months of it. For tax years beginning after 2023 — which covers every 2025 and 2026 year end — electronic filing is mandatory for essentially all corporations, with no gross-revenue threshold, and paper-filing a return that had to go in electronically draws a $1,000 penalty. Alberta and Quebec require their own provincial corporate return as well. A corporation with no activity still has to file. Keep the supporting records six years from the end of the last tax year they relate to.

Ottawa is in Ontario, so sales tax is 13% HST, the federal GST harmonised with the provincial part, charged on most goods and services in 2025 and 2026. There is no separate city sales tax. Some items are zero-rated or exempt, such as basic groceries, and a few carry a point-of-sale rebate of the provincial part. Ottawa property tax is a different tax, set by the city on your assessed value.

Not every dollar counts. The medical expense credit applies only to eligible expenses above a threshold, set as the lesser of a fixed percentage of your net income or a flat dollar amount the CRA indexes each year, so a lower income means a lower threshold. What clears the threshold becomes a non-refundable credit rather than a refund of the cost. You can pick any twelve-month period ending in the tax year and pool the family's receipts.

Employment income is everything your employer pays or provides for your work: salary or wages, overtime, bonuses, commissions, employer-controlled tips, and the value of taxable benefits such as a company vehicle or certain allowances. It shows in box 14 of your T4, before deductions. Add every T4 you receive, plus tips the employer did not report, then subtract only the limited employment deductions you qualify for, such as union dues or approved work-space costs.

No credit exists simply for marrying. What changes is that you file as a couple. You may claim the spouse or common-law partner amount if your spouse has little income, transfer certain unused credits such as age, disability, and tuition amounts, pool medical expenses and donations on one return, and split eligible pension income. Marriage or common-law status also combines your incomes for income-tested payments, which can reduce the GST/HST credit and the child benefit.

The T2 is the return every resident corporation files with the CRA for each tax year, including inactive years. It computes taxable income after tax adjustments such as capital cost allowance, then works out federal and provincial tax on it, with the small business deduction applied as a reduction of the federal tax payable rather than of taxable income. The return is due six months after year end; the balance two months after year end, or three months for an eligible CCPC claiming the small business deduction.