Your 2025 Corporate Year-End Tax Playbook: From the $150 Holiday Party Rule to New November Incentives

2025 Corporate Year-End Tax Playbook

As festive decorations go up across Ontario and many businesses shift into holiday mode, December also marks one of the most important windows for strategic tax planning. While this season is often associated with increased spending, it is also your best opportunity to reduce your corporate tax bill before December 31st.

At RT Consulting, we believe tax planning is proactive—not something that happens after year-end. Your accountant should help you prepare for what’s ahead, not just report on what already happened. That’s why we’ve put together this comprehensive 2025 year-end guide to help your business take advantage of deductions, avoid costly tax mistakes, and understand the latest legislation that could impact your bottom line.

1. The Staff Holiday Party: A Celebration with Tax Advantages

One of the most common December questions we receive is: “Can I deduct the cost of our company holiday party?” Yes—you absolutely can. But the CRA has rules you need to follow to claim a full 100% deduction.

✅ How to Qualify for the 100% Deduction

To be fully deductible, your staff party must meet the following criteria:

• Open to all employees at a particular location (not just management or select team members).

• Cost must not exceed $150 per person, including tax and gratuities.

• Up to six of these fully deductible events are allowed each year.
  

⚠️ The $150 Taxable Benefit Rule

If the cost per employee exceeds $150—even by a small amount—the entire cost becomes a taxable benefit and must be added to the employee’s T4. That’s a holiday surprise no one wants!

Virtual Events

Online celebrations have stricter limits:

• $50 per person for food or beverages

• $100 per person if entertainment is included

2. Holiday Gifting: Understanding What’s Taxable

Gift-giving is a great way to show appreciation, but the CRA treats different types of gifts very differently.

🎁 Gifts to Employees

• Non-cash gifts (up to $500 FMV annually) for special occasions such as holidays or birthdays are not taxable to the employee.

• Gift cards are considered cash and are typically treated as taxable benefits requiring payroll deductions.

  
  

  To avoid unnecessary CRA scrutiny, physical gifts are safest.

  
  

🎁 Gifts to Clients

• Entertainment (sports tickets, shows) remains 50% deductible, provided it relates to earning business income.

• Branded promotional items (mugs, calendars, pens) are generally 100% deductible as advertising expenses.

  
  

3. Key 2025 Tax Changes You Should Know Before Year-End

This year brought several important tax updates—some cancelled, some newly introduced—affecting year-end planning.

A. Capital Gains Inclusion Rate Remains at 50%

The federal proposal to raise the inclusion rate to 66.67% was withdrawn in March 2025.This means business owners can continue planning around the 50% inclusion rate, providing clarity for investment and asset-sale decisions.

B. New “Productivity Super-Deduction” (Introduced November 2025)

As of November 4, 2025, businesses acquiring eligible manufacturing or processing buildings may qualify for immediate 100% expensing.This is a major incentive for manufacturers to invest before year-end.

C. Accelerated Investment Incentive (AII) Returns

For assets such as:

• Machinery

• Equipment

• Fiber optic systems

• Computer hardware

…the AII allows enhanced first-year depreciation often double the normal CCA without the usual Half-Year Rule.

4. Specialized Considerations for Specific Industries

For Medical Professional Corporations (MPCs)

The Passive Income Grind still applies in 2025.If your corporation earns over $50,000 in passive income, your Small Business Deduction begins to shrink, increasing your tax rate.

Strategy: Review your investment gains before December 31. Deferring some sales to January 2026 may preserve your lower corporate tax rate.

For Retail Businesses

• Boxing Day (Dec 26) is a statutory holiday in Ontario. Employees who work that day must receive either:

  • Public holiday pay + premium pay (1.5x), OR

  • Regular pay + a substitute day off

• Inventory Write-Downs: If certain products won’t sell (dead stock), you can value inventory at the lower of cost or fair market value. Writing down obsolete items increases COGS and reduces taxable income.

  
  

5. The Bonus Accrual Strategy (The 180-Day Rule)

If your corporation had a strong year, declaring a bonus before year-end can significantly lower taxable income.

How it works:

• You declare the bonus by December 31, reducing 2025 corporate income.

• You have up to 180 days in 2026 to actually pay it.

  
  

This pushes personal tax to 2026 while keeping the deduction in 2025—a powerful timing advantage.

Your 2025 Year-End Tax Checklist

• Confirm staff party costs stay under $150 per person

• Evaluate new capital purchases for 100% expensing eligibility

• Write down obsolete inventory before December 31

• Check if passive income affects your SBD limit

• Consider declaring bonuses before year-end using the 180-day rule

  
  

Let RT Consulting Help You Finish 2025 Strong

Effective tax planning doesn’t happen in April—it happens right now. With new expensing incentives, stable capital gains rules, and industry-specific opportunities, December is the ideal time to position your business for success.

Whether you need strategic guidance on:

• Bonus declarations

• Capital asset planning

• Inventory management

• Salary vs. dividend decisions

• Passive income optimization

...our team at RT Consulting is here to help.

Ready to maximize your deductions before December 31st?

Contact us today to book your year-end tax planning session.

Dimpi Verma

November 2025