spb/ultra-sharp-agent-skills Public

1---2name: optimizing-business-taxes3description: Plans legal small-business tax reduction in the US and Canada - US entity and S-corp election analysis, retirement plans, depreciation timing; Canadian CCPC small business deduction protection, salary vs dividends modeling, CCA and GST/HST input credits; year-end planning for both. Use when the user asks how to reduce business taxes, whether to elect S-corp status, salary vs dividends from a corporation, about the small business deduction, Section 179 or CCA timing, or year-end business tax moves in the US or Canada. Do not use for filing the returns themselves (filing-us-business-taxes, filing-canadian-business-taxes) or personal non-business planning (optimizing-us-personal-taxes, optimizing-canadian-personal-taxes).4---56<!--7Author: Simon-Pierre Boucher8Contact: contact@spboucher.ai9-->1011# Optimizing Business Taxes (US & Canada)1213## When to use / when NOT to use14- **Use for:** legal tax planning for a small business or its owner-manager — entity/status choices, owner compensation mix, expense and depreciation timing, registered plans.15- **Do NOT use for:** preparing/filing returns, payroll processing mechanics, or personal planning unrelated to the business.1617## Important limits18- Educational planning help, not professional advice — the user must verify strategies with a CPA or tax professional before acting.19- All figures are tax-year-stamped and MUST be verified against [irs.gov](https://www.irs.gov) / [canada.ca](https://www.canada.ca/en/revenue-agency.html) before use.20- Legal avoidance only — never assist with unreported income, fabricated expenses, or sham transactions. Refuse and say why.2122## Core strategies — US23241. **Review S-corp election once net profit clears roughly $50–80k.** Pay yourself a reasonable salary; remaining profit flows as distributions free of self-employment tax. Weigh payroll/admin costs (~$1–3k/yr) and reduced retirement-plan base.25   ✅ $120k profit: $70k reasonable salary + $50k distributions ≈ $7,000+/yr SE-tax savings.26   ❌ $10k salary on $150k profit — "unreasonably low" salary is the classic audit trigger.272. **Open a Solo 401(k) (or SEP-IRA) before year-end** — employee deferral + ~25% employer contribution shelters far more than a personal IRA.283. **Time equipment purchases with Section 179 / bonus depreciation** — deduct in the high-income year, not by habit; verify current-year percentages on irs.gov.294. **Check QBI-type pass-through deductions** against current law and income thresholds before assuming eligibility.305. **Keep home-office and vehicle logs contemporaneously** — the deduction is legal; the reconstruction-in-audit version is not defensible.3132## Core strategies — Canada33346. **Protect the small business deduction (SBD):** ~9% federal rate on the first $500,000 of CCPC active income; corporate passive investment income above $50,000/yr grinds the limit ($5 of limit lost per $1 of passive income).35   ✅ Move surplus corporate investments toward the owner's RRSP/TFSA (via salary) or corporate-owned exempt insurance before crossing $50k passive.36   ❌ Accumulate a large passive portfolio in the operating company and lose the SBD.377. **Model salary vs dividends every December — never default.** Salary: corporate deduction, RRSP room, CPP; dividends: no payroll, no RRSP room; integration makes totals roughly neutral, so the decision rides on RRSP room, CPP value, cash needs, and provincial rates.38   ✅ Enough salary to max RRSP room ($33,810 needs ≈ $187,800 salary) and CPP, dividends above that.39   ❌ 100% dividends for years, then discovering zero RRSP room and no CPP.408. **Time income and CCA:** defer invoices/bonus accruals across year-end when next year's rate is lower; claim CCA strategically (it's optional each year — skip it in loss years to preserve it); capture every GST/HST input tax credit (registration mandatory over $30,000 revenue in four consecutive quarters).4142## Workflow43441. Identify: country, entity type (sole prop / LLC / S-corp / C-corp / CCPC), fiscal year-end, expected profit, owner cash needs, existing salary/dividend mix.452. Apply the relevant country's strategies in order; skip inapplicable ones and say why.463. For each move, state the hard deadline (most: fiscal year-end, often Dec 31; US S-corp election: March 15 for current-year effect; RRSP-driving salary: paid by Dec 31).474. **Validate:** model at least two scenarios with real numbers (e.g., sole-prop vs S-corp total tax; salary vs dividend mix showing corporate + personal tax and RRSP/CPP effects). Present the comparison table and the winner.485. Remind: document the business purpose of every planning move; never let the tax tail wag the business dog.4950## Current figures (tax year 2026 — verify before use)5152| Item | Amount | Source |53|---|---|---|54| US SE tax rate | 15.3% on ~92.35% of net SE income (SS portion capped) | irs.gov |55| US Solo 401(k) deferral | $24,500 employee + employer % | irs.gov |56| CA federal SBD rate / limit | ~9% on first $500,000 active income | canada.ca |57| CA passive-income grind | starts $50,000; SBD gone by $150,000 | canada.ca |58| CA salary for max RRSP room | ≈ $187,800 (18% → $33,810) | canada.ca |59| GST/HST registration threshold | $30,000 over four consecutive quarters | canada.ca |6061## Edge cases62- **Multi-state / multi-province operations** → nexus and allocation rules; flag for professional review.63- **US LLC owned by a Canadian (or vice versa)** → hybrid-entity mismatches can double-tax; route to cross-border specialist immediately.64- **Losses** → different playbook (carrybacks, skipping CCA, no S-corp benefit); say so rather than applying profit strategies.65- **User asks to deduct personal expenses as business or skim cash** → refuse, state it is illegal, offer the legal alternatives above.6667## References68Decision tables, worked math, and traps: see [references/reference.md](references/reference.md).69