December Moves That Lower Your April Tax Bill

Early December — Planning Moves

These items need thinking time and, in some cases, money still in the account — which is why they belong in the first week of December, not the last.

☐ Estimate your net income for the year

Total what you've invoiced, subtract what you've spent, and add a reasonable projection for December. This one number drives every other decision on this list: it tells you your approximate marginal rate, whether your 25–30% tax reserve is actually big enough, whether an RRSP contribution is worth prioritizing, and whether deferring income even helps. If your records are current, this is a ten-minute exercise; if they aren't, that's your first item (see the catch-up step below).

☐ Decide on equipment timing — for things you actually need

If you genuinely need a laptop, camera, or tool for the business, buying it before December 31 — and having it available for use — means capital cost allowance starts this year instead of next. The half-year rule generally limits year one to half the normal CCA rate, so the first-year benefit is modest, but it's a year of depreciation you otherwise wait twelve months for.

Say the quiet part plainly: do not buy things you don't need to get a deduction. A deduction is a discount, not free money. Spending $2,000 to save perhaps $500–$900 in tax leaves you poorer by the difference. December purchases should pass the same test as July purchases — "does the business need this?" — with timing as the only new variable.

☐ Know your invoice-timing position

For most freelancers reporting on an accrual basis, income is recognized when it's earned and billed — which means a project finished in late December and invoiced on January 2 generally lands in next year's income, while the same invoice dated December 28 lands in this year's. That's legitimate timing, not evasion: the income is fully taxed either way, just in different years. It's most useful when this year's income is unusually high, or when deferring keeps you under an instalment or bracket threshold. Two cautions: work that is clearly completed and billable may be considered earned even if the invoice waits, so run large or repeated deferrals past an accountant — and never delay invoicing money you need in January just to save tax in April.

☐ Check your RRSP room

Contributions in the first 60 days of the new year still deduct against this year, but December is when the planning happens: pull your contribution room from your latest notice of assessment or CRA My Account, and decide what the reserve can spare. For self-employed Canadians with no employer pension, the RRSP deduction is one of the only levers that can still cut the April balance after the income is already earned.

☐ Reconcile instalments paid against what you'll owe

Compare the instalments you've actually paid this year against your estimated bill. If you've underpaid and a December 15 instalment is still ahead of you, topping it up reduces the instalment interest that would otherwise compound daily. If you've overpaid because income dropped, that's useful to know before you wire more money to the CRA.

Before December 31 — The Hard Deadlines

Everything in this section is anchored to midnight on the 31st. None of it can be reconstructed credibly in April.

☐ Record your odometer reading

The single most time-sensitive item on this list. Your December 31 odometer reading closes this year's mileage log and opens next year's: total kilometres driven is the denominator of the business-use percentage that drives your entire vehicle deduction. Write it down, photograph the dash, or note it in your tracking app — the CRA's mileage log expectations assume you have it, and a log whose trip total can't reconcile to odometer readings is exactly what reviewers probe.

☐ Sweep for missing receipts and expenses

Walk your bank and credit card statements for the year and flag every business charge that never made it into your records — software renewals, parking, the domain name, the October client lunch. Each one found is a real deduction recovered. If you're more than a quarter behind, our catch-up bookkeeping guide covers the fastest route from shoebox to categorized records.

☐ Chase — or write off — truly dead invoices

December is the deadline for a decision on every invoice that's gone cold: make the final collection attempt, or conclude it's uncollectable and write it off. A properly written-off bad debt is deductible, but the determination belongs to the year you make it — see writing off unpaid invoices for the mechanics and the GST/HST recovery that comes with it.

☐ Pay the deductible bills that are due anyway

Association dues, licence renewals, insurance premiums, software subscriptions that renew in early January — if the expense is real and imminent, paying it in December brings the deduction into this year. Same rule as equipment: this is about timing costs you're committed to, not manufacturing spending.

☐ Update home-office measurements if anything changed

Moved during the year? Converted the spare room? Your business-use-of-home percentage should reflect the actual space and dates. Measure now while it's checkable, and note the changeover date — a mid-year move means two calculations, not one.

Early January — The Clean Start

☐ Take the January 1 odometer reading

Same number as December 31 in theory — but recorded fresh, it anchors the new year's log from day one.

☐ Archive last year's records

Export the year's invoices, receipts, statements, and mileage log into one dated archive. The CRA expects records kept for roughly six years from the end of the tax year — digital copies are fine when complete and legible, which is one more argument for scanning receipts the day you get them (see CRA receipt requirements).

☐ Review your rates

January is the natural moment to raise prices — clients expect new-year adjustments, and the income estimate you built in December tells you whether last year's rates actually funded your tax, CPP, and savings targets.

☐ Book the accountant now

If a professional files for you, their calendar in April looks like a playoff bracket. Booking in January gets you a real appointment, unrushed advice, and time to fix anything they flag — instead of a June-15 scramble.

The Part That Makes This a 30-Minute Job

Every item above is either trivial or painful depending on one thing: whether the year's records already exist. When your invoices, receipts, and trips have been captured as they happened, "estimate net income" is reading a screen and "sweep for missing expenses" is a short diff against your statements. InvoiceFast's Tax tab keeps that running picture for you — expenses categorized to real T2125 lines as you snap receipts, mileage logged automatically, and a live line-by-line T2125 summary you can open in December to see exactly where the year stands. Your first 25 expenses and 25 trips are free; Pro + Tax ($12.99/month or $99.99/year CAD) unlocks unlimited records and the PDF/CSV export your accountant works from.

Frequently Asked Questions

Should I buy equipment before year-end just for the deduction?

No. A deduction is a discount, not free money — spending $2,000 to save roughly $500–$900 in tax still costs you the difference. Year-end timing only matters for equipment you need regardless, where buying before December 31 starts CCA a year earlier.

Can I really shift income by delaying an invoice?

Often yes: under accrual reporting, a project invoiced January 2 generally lands in the new year's income. It's legitimate timing, fully taxed a year later. Work that's clearly completed may count as earned even unbilled, so clear large deferrals with an accountant.

When is the RRSP deadline?

Contributions made in the first ~60 days of the new year (typically until about March 1) still deduct against the year just ended. December is for checking room and planning the amount; the money can move in February.

What if I missed the December 15 instalment?

Pay it as soon as possible — instalment interest compounds daily on the shortfall, and a prompt late payment stops the meter. Paying at least the CRA's suggested (prior-year-based) amounts across the year guarantees no instalment interest at all.

How long do I keep my records?

Roughly six years from the end of the tax year they support. Keep the archive digital, complete, and legible — thermal receipts fade long before the CRA's window closes.