2026 Tax Optimization Plan (CRA-Compliant)
Owner: Mahdi Moradi Status: Draft Version: 2.0.0 Last Updated: 2026-04-20 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.
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 | $360–$2,400 |
| Total Deductions | $8,000–$15,000 |
| Net Business Loss | $6,000–$13,000 |
| Tax Savings (est.) | $2,000–$5,000 |
A $6,000–$13,000 business loss is reasonable and CRA-defensible for a business in its first full operating year with documented investment in growth. This is actually more conservative than the original $20K plan, which strengthens the CRA position.
2. Deduction Categories (Detailed)
2.1 Wife's Wages — $5,200–$15,600
This is your single largest legal deduction.
| Detail | Value |
|---|---|
| Rate | $20–$30/hour |
| Hours/Week | 5–10 hours |
| Annual Hours | 260–520 hours |
| Annual Total | $5,200–$15,600 |
| 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 — $1,000–$2,000
| Detail | Value |
|---|---|
| Rate | $12–$15/hour |
| Per Child | $500–$1,000 |
| Tax Impact | Children pay $0 tax |
Legitimate tasks:
- Photography assistance
- Packaging help (gifts and cookies)
- Cleaning office space
- Sorting products
- Social media ideas
- Testing AI agents
- 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 (FMV from 2025):
| Item | FMV (2025) | CCA continues in 2026 |
|---|---|---|
| Desktop computer | $300 | 55% of remaining UCC |
| Monitors (2) | $80 | 55% of remaining UCC |
| Desk | $100 | 20% of remaining UCC |
| Printer | $40 | 55% of remaining UCC |
2.4 Home Office — $2,000–$3,000
Important: In 2026, claim the business home office deduction INSTEAD of the $500 employment flat-rate deduction. The business deduction is more valuable.
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
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 | $5,200 | $10,000 |
| 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 | $10,240 | $21,300 |
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.