2026 Tax Optimization Plan (CRA-Compliant)
Owner: Mahdi Moradi Status: Draft Version: 2.1.0 Last Updated: 2026-04-28 Applies To: Company
Disclaimer: This document summarizes a tax strategy based on publicly available CRA guidelines. It is not professional tax or legal advice. Consult a qualified Canadian tax professional before filing.
0. 2025 Filing Results (Reference)
Filed April 2026 via Wealthsimple Tax. First year of Bornara AI business.
| Item | Amount |
|---|---|
| Industry code | 541514 |
| Revenue | $0 |
| Salaries (Line 9060 — Narjes) | $1,500.00 |
| Subscriptions (Line 8760) | $711.17 |
| Office expenses (Line 8810) | $307.68 |
| CCA Year 1 (Class 8 + Class 50) | $293.59 |
| Total deductions | $2,812.44 |
| Net business loss | ($2,812.44) |
| Narjes income (Line 13000 on her return) | $1,500.00 |
| Narjes tax on that | $0 |
| Spousal credit reduction (Mahdi) | ~$338 |
| Tax saved from business loss (~30.5%) | ~$858 |
| Net tax benefit (wages included) | ~$520 |
CCA Carried Forward to 2026
| Class | UCC end of 2025 | Rate | Items |
|---|---|---|---|
| 8 | $61.13 | 20% | Monitor stand |
| 50 | $756.12 | 55% | Desktop + BenQ + ASUS monitors |
2025 Lessons Learned
- Keep receipts as PDFs from day one — reconstructing from PayPal was painful.
- Spousal wages at $1,500 = marginal benefit — $120 net. Worth it for pattern only.
- At $7,200+ wages (2026), the benefit jumps significantly — net ~$396–$792/yr.
- PayPal USD→CAD amounts vary monthly — use PayPal statement amounts, not calculated.
- IONOS bundles mail + domain on same invoice — track line items, not just totals.
- eBay comparable printouts (PDF) are solid FMV evidence — URLs expire, PDFs don’t.
- Business should pay from business account starting 2026 — personal payment tracking is messy.
- Register payroll account before paying Narjes in 2026 — issue proper T4 for amounts >$3,500.
- Consider home office deduction in 2026 — skipped in 2025 (too complex for first year, low benefit).
- LOC interest on business draws is deductible — set up tracking system (see loc-funding-mechanics.md).
1. Strategy Overview
As a Canadian sole proprietor with full-time employment income, the 2026 tax strategy focuses on:
- Maximizing legitimate business deductions to offset employment income
- Paying family members for real work performed
- Claiming Capital Cost Allowance (CCA) on new equipment
- Claiming home office deduction (replacing the $1500 employment deduction used in 2025)
- Documenting everything for CRA audit readiness
Expected 2026 Outcome
Updated April 20, 2026: Revised for 2-stream focus (Tools + Cookies).
| Item | Amount |
|---|---|
| Business Revenue | $0–$2,400 |
| Total Deductions | $10,000–$20,000 |
| Net Business Loss | $8,000–$18,000 |
| Tax Savings (est.) | $2,500–$6,000 |
A $8,000–$18,000 business loss is reasonable and CRA-defensible for a business in its first full operating year with documented investment in growth. 2026 is a setup year — expect mostly costs with minimal revenue.
2. Deduction Categories (Detailed)
2.1 Wife's Wages — $7,200–$14,400
This is your single largest legal deduction.
| Detail | Value |
|---|---|
| Rate | $20/hour (fixed) |
| Hours/Week | 7–14 hours |
| Annual Hours | 360–720 hours |
| Annual Total | $7,200–$14,400 (capped at $14,400) |
| Payment Method | E-transfer (preferred) or cash with signed receipt |
| Tax Impact (Her) | Likely pays $0 or minimal tax on this income |
Legitimate tasks she performs:
- Cookie recipe testing, development, and documentation
- Cookie packaging design and production
- Cookie photography and Instagram content creation
- Cookie customer orders and communication
- Bornara Tools logo design and UI mockups (May–June)
- Social media graphics for Bornara Tools launch
- Administrative work (emails, scheduling, receipts)
- Business planning meeting participation
Required Documentation:
- Weekly or monthly timesheets (date, hours, tasks)
- Signed receipts for each payment
- E-transfer confirmations (keep screenshots)
- Task descriptions aligned with business needs
2.2 Kids' Wages — $500–$1,000
| Detail | Value |
|---|---|
| Rate | $12–$15/hour |
| Per Child | $250–$500 |
| Tax Impact | Children pay $0 tax |
Legitimate tasks:
- Photography assistance
- Packaging help (gifts and cookies)
- Cleaning office space
- Sorting products
- Label printing and sticking
Required Documentation:
- Timesheets with dates, hours, and tasks
- Signed receipts (parent signs on behalf if minor)
2.3 Equipment — Capital Cost Allowance (CCA)
New Equipment Purchases (2026):
| Item | Est. Cost | CCA Class | Rate | Year 1 Deduction |
|---|---|---|---|---|
| Laptop | $1,500–$2,500 | Class 50 | 55% | ~$687–$1,375 (half-year) |
| Phone | $1,200–$1,800 | Class 50 | 55% | ~$330–$495 (half-year) |
| Monitor | $300–$600 | Class 50 | 55% | ~$82–$165 (half-year) |
| Ring light | $50–$100 | Class 8 | 20% | ~$5–$10 |
| Label printer | $100–$200 | Class 50 | 55% | ~$27–$55 |
| Camera | $200–$500 | Class 8 | 20% | ~$20–$50 |
| Office furniture | $300–$500 | Class 8 | 20% | ~$30–$50 |
Status (March 2026): No new equipment purchased yet. Purchases will be made as-needed when business activities require them. Budget is an estimate.
Secondhand / Used Equipment: CRA accepts used equipment for CCA. What matters is the actual purchase price (not original retail). Required documentation for used items:
- Receipt or bill of sale showing price paid, date, and seller
- If from a private seller: written agreement with seller name, item description, price, and date
- If from online marketplace (Facebook, Kijiji): screenshot of listing + payment proof
- Keep a photo of the item showing condition at purchase
- CCA class and rate are the same whether new or used
CCA Note: First-year rule applies 50% of the normal rate. Remaining value continues to be deducted in future years.
Total Equipment CCA (2026): ~$1,200–$2,000
Existing Equipment (Personal Use Since 2019 → Business Use Started 2025):
CCA Rule for old personal assets converted to business use: CCA base = lower of (a) original cost OR (b) FMV at the date business use started (2025). For a computer bought in 2019 used personally since, the 2025 FMV is what matters — NOT the 2019 purchase price. Old receipts help as supporting context only.
Can you still claim it? Yes — but based on 2025 FMV, not original price. For any components added in 2024–2025 with receipts: use actual purchase price.
| Item | Year Bought | Est. FMV 2025 | CCA Class | 2025 Yr1 (half-year) | 2026+ Annual |
|---|---|---|---|---|---|
| Desktop computer | 2019+ | ~$200–$400 | Class 50 | ~$55–$110 | 55% of remaining UCC |
| Monitors (2) | 2019+ | ~$50–$100 | Class 50 | ~$14–$28 | 55% of remaining UCC |
| Desk | 2019+ | ~$50–$100 | Class 8 | ~$5–$10 | 20% of remaining UCC |
| Printer | 2019+ | ~$20–$50 | Class 50 | ~$6–$14 | 55% of remaining UCC |
| Total (est.) | ~$320–$650 | ~$80–$162 |
How to determine FMV for old parts: Search eBay "sold listings" for your exact model (e.g., "Intel i7 8700 desktop") to find what it sold for recently. Screenshot = your FMV support.
For newer components (2024–2025 additions): If you have receipts, use actual price — much higher CCA base.
2.4 Home Office — $2,000–$3,000
Important: In 2026, claim the business home office deduction for Bornara AI only. Do NOT claim the remote work / employment home office deduction for SecondHarvest (day job). Keeping it to one business claim is simpler and avoids CRA complications with dual claims on the same space.
Calculation Method:
Business-use % of home = Office square footage / Total home square footage
Typical range: 10–15%
Deductible Items:
| Expense | Annual Cost (est.) | Business % | Deduction |
|---|---|---|---|
| Mortgage interest | $8,000–$12,000 | 10–15% | $800–$1,800 |
| Utilities | $3,000–$4,000 | 10–15% | $300–$600 |
| Internet | $1,200–$1,500 | 30–50% | $360–$750 |
| Property tax | $3,000–$5,000 | 10–15% | $300–$750 |
| Home insurance | $1,200–$1,800 | 10–15% | $120–$270 |
| Repairs (if any) | Variable | 10–15% | Variable |
Total Home Office Deduction: $2,000–$3,000
⚠️ YEAR-END ACTION REQUIRED — Utilities Calculation
Every December, collect and record the following bills for the full calendar year:
Bill Where to find it What to save Electricity (ENMAX) ENMAX online portal or paper bills 12 monthly amounts, save PDFs Natural gas (ATCO/Direct Energy) Portal or paper bills 12 monthly amounts, save PDFs Home insurance Annual renewal letter Annual total Property tax (City of Calgary) Tax notice (usually May) Annual total Internet (Telus) Portal or paper bills 12 monthly amounts The formula:
TODO before December 2026:
- Measure your home office/workspace square footage (a tape measure takes 5 min)
- Measure total home square footage (use property listing, floor plan, or tape measure)
- Save all 12 months of utility bills throughout the year — do NOT wait until December
Cookie business note: The chest freezer (Costco, April 18) adds to electricity consumption. This is already captured by the home office % — no extra tracking needed. Just save the bills.
Prerequisite: Bornara AI must have at least $1 of revenue in 2026 to claim home office on T2125. If Bornara Tools generates any AdSense income, you qualify. Unused home office expense carries forward indefinitely if revenue is $0.
2.5 Software, Tools & Subscriptions — $1,000–$2,000
| Tool / Service | Monthly Cost | Annual Cost |
|---|---|---|
| ChatGPT Plus | $20 | $240 |
| GitHub Copilot | $10 | $120 |
| Canva Pro | $13 | $156 |
| Adobe Creative Cloud | $55 | $660 |
| Cloud hosting (Azure) | $20–$50 | $240–$600 |
| Email hosting | $5–$10 | $60–$120 |
| Accounting software | $0–$20 | $0–$240 |
| Other AI tools | $10–$30 | $120–$360 |
2.6 Shopify & E-Commerce — $0–$500
Updated: Shopify subscription deferred until cookies go online or Giftifye starts. No Shopify costs in 2026 unless cookie online sales require it.
| Expense | Annual Cost |
|---|---|
| Shopify subscription | $0–$468 (only if cookies go online) |
| Shopify apps | $0–$100 |
| Product samples | $0 |
| Packaging materials | $50–$200 (cookie packaging) |
2.7 Advertising — $1,000–$3,000
| Platform | Monthly Budget | Annual Budget |
|---|---|---|
| Facebook/Instagram | $50–$150 | $600–$1,800 |
| TikTok Ads | $50–$100 | $600–$1,200 |
| Google Ads | $0–$50 | $0–$600 |
All advertising spend is 100% deductible.
2.8 Domains & Hosting — $300–$800
| Domain/Service | Annual Cost |
|---|---|
| Giftifye.com domain | ~$15–$20 |
| MoviesCollage.com | ~$15–$20 |
| AI platform domain | ~$15–$20 |
| Other domains | ~$50–$100 |
| Web hosting | $100–$300 |
| SSL certificates | $0–$50 |
2.9 Travel & Vehicle — $500–$1,500
| Expense | Deduction Method |
|---|---|
| Fuel (business %) | Track business portion of total fuel |
| Parking | Keep all receipts |
| Mileage | Log all business trips with KM |
| Supplier visits | 100% deductible |
| Client meetings | 100% deductible |
2.10 Meals & Entertainment — 50% Deductible
| Type | Deduction Rule |
|---|---|
| Business planning dinner | 50% deductible (with wife as business partner) |
| Client meals | 50% deductible |
| Team/strategy meetings | 50% deductible |
Document for each meal: Date, location, amount, attendees, business purpose
2.11 Cookie Business Expenses
| Expense | Annual Estimate | Notes |
|---|---|---|
| Ingredients | $200–$400 | Flour, butter, chocolate, sugar |
| Packaging | $100–$200 | Boxes, labels, tissue paper |
| Shipping supplies | $50–$100 | Mailers, tape, padding |
| Food handling permit | $50–$200 | Municipal requirement (check locally) |
| Kitchen supplies | $50–$100 | Business-use baking equipment |
3. Total 2026 Deduction Summary
Updated April 20, 2026: Reduced to reflect 2-stream focus. Lower total = more conservative CRA position = less audit risk.
| Category | Low Estimate | High Estimate |
|---|---|---|
| Wife's wages | $7,200 | $14,400 |
| Kids' wages | $500 | $1,000 |
| Equipment CCA | $1,200 | $2,000 |
| Home office | $2,000 | $3,000 |
| Software/tools | $500 | $1,200 |
| OpenAI API | $80 | $300 |
| Shopify/e-commerce | $0 | $500 |
| Advertising | $0 | $100 |
| Domains/hosting | $60 | $300 |
| Travel/vehicle | $200 | $500 |
| Meals (50%) | $100 | $300 |
| Cookie expenses | $200 | $600 |
| Courses/training | $0 | $200 |
| LOC interest | $200 | $800 |
| Insurance | $0 | $500 |
| TOTAL | $12,240 | $25,700 |
4. T2125 Filing Strategy
How to File
| Item | Detail |
|---|---|
| Form | T2125 — Statement of Business or Professional Activities |
| Filed With | Your personal T1 return |
| Revenue Line | Report all business income |
| Expenses Line | Report all documented expenses |
| Net Loss | Applied against employment income on T1 |
| Filing Tool | Wealthsimple Tax (free) or accountant |
CRA Narrative (Keep With Records)
"Bornara AI is a sole proprietorship in its first full year of operations in 2026. The business operates two active revenue streams: a free online developer toolbox (Bornara Tools) generating ad revenue, and a cookie baking business with local and online sales. Two additional streams (Giftifye.com gift store and an AI agent SaaS platform) are in planning with documented assets preserved for 2027 launch. The business incurred a net loss due to startup investments in software, equipment, and wages for family members performing legitimate business tasks. The business has a documented plan, real revenue activity, and a clear path to profitability by 2027–2028."
5. HST Considerations
| Item | Detail |
|---|---|
| Registration Required | No — only mandatory at $30,000 revenue |
| Voluntary Registration | Consider if expenses > revenue (get ITCs back) |
| When to Register | When approaching $30,000 annual revenue (likely 2027-2028) |
6. Incorporation Timeline
| Trigger | Action |
|---|---|
| Profit < $50,000/year | Stay as sole proprietor |
| Profit = $50,000–$80,000 | Evaluate incorporation |
| Profit > $80,000/year | Incorporate (small business tax rate advantage) |
| Liability concerns | Incorporate earlier for legal protection |
When to incorporate: January 1 of the first year where the prior year showed ≥$50K net profit. This avoids mid-year stub periods and dual filing. Consult an accountant 3–6 months before the target date. See Business Plan Section 5a for the detailed decision framework.
7. Non-Profit / Pro-Bono Consulting (ASSC Project)
Mahdi provides website development, hosting, and admin services to ASSC at a reduced or no cost. This requires specific handling to maximize tax benefit legally.
Step 1: Determine ASSC's Charity Status
| ASSC Status | Tax Strategy |
|---|---|
| CRA Registered Charity | Invoice at fair market rate → receive payment → donate back → get T2501 receipt → claim on Schedule 9 |
| Not a registered charity | Invoice at reduced rate → revenue = what they pay → deduct your real costs only |
Strategy A — ASSC is a Registered Charity (Best Tax Leverage)
How it works:
- Sign a consulting agreement (rate: $75–$150/hr development, cost+ for hosting)
- Invoice ASSC monthly for fair market value of services
- ASSC pays you (cheque or e-transfer)
- You donate back the "discount" amount → they issue a T2501 charitable donation receipt
- You claim the donation on your T1 → ~33% federal credit at your income level
2025 — Retroactive approach:
- Cannot retroactively invoice and donate for 2025 (you'd need to have actually received payment)
- DO deduct any out-of-pocket hosting/domain costs you paid for ASSC on T2125
2026+ — Ongoing structure:
- Set up consulting agreement now
- Invoice quarterly, receive payment, donate back agreed portion
- Keep time log, invoices, payment confirmations, and charity receipts
Strategy B — ASSC is NOT a Registered Charity
- Charge them what they can afford (e.g., $0–$500/year)
- Report that amount as T2125 revenue
- Deduct 100% of your real costs (hosting, domain, any tools)
- Your donated time/labour is NOT deductible (CRA rule: cannot deduct value of your own services)
- The "discount" has no tax effect — it's just goodwill
What to Deduct Either Way (2025 and 2026)
| Expense | Deductible | Notes |
|---|---|---|
| Hosting costs you paid for ASSC | ✅ Yes | Real cash expense on T2125 |
| Domain registration for ASSC | ✅ Yes | Keep invoice |
| Your development time (unpaid) | ❌ No | CRA does not allow donated services deduction |
| Tools/software used for ASSC | ✅ Partial | Business-use % of total cost |