If you are a business owner and pay yourself an annual bonus, here’s a tax deferral tip that you might want to take advantage of.
Under Canadian tax rules, a bonus must be paid out within 180 days of a corporation’s year end in order for the bonus to be deductible in that tax year. This allows you to defer the payment of the bonus into the following tax year. If you do this, then the business income is taxed at the corporate rate in one year, with the bonus being deductible against the corporation’s income, and the personal tax on the bonus is deferred into the next tax year.