The actions you take before December 31 determine a significant portion of your 2026 tax bill. Here is a practical checklist for self-employed Canadians to complete before year-end.
Before December 31: Income and Payment Timing
- ☐ Invoice all outstanding work and collect payment before December 31 if you want the income in 2026, or after January 1 if deferring to 2027 works better for you
- ☐ Review your total 2026 revenue against the GST/HST threshold — if you are within $5,000–$10,000 of $30,000 and haven’t registered, register now to avoid crossing mid-January
- ☐ Make your Q4 instalment payment by December 15 if required
Before December 31: Maximizing Deductions
- ☐ Purchase equipment you need: Computers, software, office furniture bought before December 31 can be depreciated via CCA starting in 2026 (half-year rule applies)
- ☐ Prepay eligible business expenses that are deductible when paid: insurance premiums, annual software subscriptions, professional memberships
- ☐ Make any professional development purchases (courses, books, conferences) before year-end to claim in 2026
- ☐ Pay outstanding professional invoices (accountant, lawyer) — deductible when paid on the cash method
Before March 1, 2027: RRSP Contributions
- ☐ Check your 2026 RRSP room on CRA My Account (it shows the room you carry into 2026 from prior years)
- ☐ Calculate your new 2027 room: it will be 18% of your 2026 net self-employment income (from your 2026 T1, filed in 2027). RRSP dollar limit for 2026: $33,810.
- ☐ Contribute before March 1, 2027 if claiming the deduction on your 2026 return
Before Year-End: Records and Admin
- ☐ Reconcile your business bank account to ensure all transactions are recorded
- ☐ Complete your mileage logbook and record December 31 odometer reading
- ☐ Organize all expense receipts for the year — scan any paper receipts and file digitally by category
- ☐ File your GST/HST annual return if you are a quarterly or monthly filer (annual filers file in spring)
- ☐ If you hired subcontractors: confirm you have their legal name, SIN or Business Number, and total payments for potential T4A-NEC reporting (required if you paid an individual $500+ in the year)
Before Year-End: Tax Estimate
- ☐ Estimate your 2026 tax owing so you know what to expect on April 30. Use CRA’s online tax estimator or your tax software in preview mode.
- ☐ Confirm your tax savings account has enough set aside — typically 25–30% of net business income plus CPP contributions
- ☐ Assess if RRSP contributions can reduce your payable to a manageable level
Frequently Asked Questions
Is there anything I should do specifically on December 31?
Record your vehicle odometer reading on December 31 — this establishes your total annual kilometres and is required for your vehicle expense claim. Also confirm that any last-minute payments to suppliers or contractors clear before the banking day ends.
Can I deduct prepaid expenses like next year’s insurance?
For cash-basis filers (most self-employed sole proprietors), you deduct expenses when paid. If you pay your full 2027 business insurance premium in December 2026, you can deduct it in 2026. However, a very large prepaid amount may need to be prorated if the CRA determines it should be accrued. For amounts consistent with normal business practice, prepayment deductions in the year paid are generally accepted.
Should I try to defer income to January to lower my 2026 tax?
Deferring income to the following calendar year is a legitimate tax planning strategy for cash-basis sole proprietors. If invoicing a client in late December, waiting until January to bill means the income appears in 2027 rather than 2026. This is only beneficial if your 2027 marginal rate will be the same or lower, and if the delay is acceptable to you and your client. Do not delay billing primarily for tax reasons if it strains the client relationship.