Bus and Coach Company Tax Planning in Canada: Managing Revenue, Fleet Costs & Business Taxes
Bus company tax planning Canada and coach company tax strategies are essential for minimizing liabilities and maximizing deductions in this competitive market. Gondaliya CPA offers expert guidance on bus business taxes Canada and coach company taxes Canada, covering areas such as eligible expenses, tax credits, and compliance.
Quick Summary
Four points decide most of the tax on a coach fleet:
- Coaches are Class 10 at 30%, and the half-year rule is suspended for vehicles acquired after 2024.
- TOSI, not the kiddie tax, governs dividends to family members, and it reaches adults.
- International passenger transport is zero-rated; domestic fares are taxable.
- T2042 is farming and T2121 is fishing. Neither has anything to do with a bus company.
Reading time: 33 minutes.
Table of Contents
The Numbers That Matter
This article covers Canadian bus, coach, charter and motorcoach operators, incorporated and unincorporated, with Ontario and Toronto context, and reflects rules current to 26 September 2026. Operating authority, safety ratings and driver certification are provincial regulatory matters outside its scope. This is educational information only and not tax or legal advice.
Tax Deductible Business Taxes, Fees, Licences, and Dues for Bus Operators
Deductible Costs and Fleet Depreciation
Deductions
- Municipal business taxes and property taxes on your terminal or yard.
- Operating authority, plate and permit costs, including interjurisdictional permits.
- Dues to industry associations and regulatory bodies.
Club dues for dining, recreation or sporting facilities are denied by paragraph 18(1)(l), which is the line that separates a trade association from a golf membership.
Managing Capital Cost Allowance and Depreciation on Eligible Capital Property
Risk Warning: the half-year rule no longer halves your first-year claim. Regulation 1100(2) is suspended for eligible property acquired after 31 December 2024 and available for use before 2034, under Bill C-15.
A $600,000 highway coach in Class 10 therefore gives $180,000 of first-year capital cost allowance rather than $90,000. Buses belong in Class 10 at 30%, not Class 16, which covers taxis, short-term rental vehicles and freight trucks over 11,788 kg. The authority for the claim is paragraph 20(1)(a) and Regulation 1100; subsection 13(21) only supplies the definitions.
| Asset | Class | Rate | Note |
|---|---|---|---|
| Coaches, buses and vans | Class 10 | 30% | No cost ceiling; half-year rule suspended |
| Supervisor or sales car over the ceiling | Class 10.1 | 30% | Capped at $39,000 for 2026; a separate class each |
| Shop equipment, hoists, tools over $500 | Class 8 | 20% | General equipment |
| Tools and small items under $500 | Class 12 | 100% | Per item |
| Terminal or garage building | Class 1 | 4% | Land is never depreciable |
| Yard paving and parking surfaces | Class 17 | 8% | Surface construction |
| Computers and systems software | Class 50 | 55% | 100% first-year deduction |
Interest Expenses, Bank Charges, and Loan-Related Fees: Rules for Bus Businesses
- Interest is deductible under paragraph 20(1)(c) where the borrowed money is used to earn business income.
- Financing fees are deducted over five years under paragraph 20(1)(e), not expensed at once.
- Bank charges on business accounts are ordinary deductions.
- The EIFEL rules in section 18.2 can limit interest for larger groups, though most independent operators fall under the exclusions.
Legal, Accounting, and Professional Fees Applicable to Bus and Coach Companies
Fees for contracts, collections, bookkeeping and the T2 are deductible. Legal costs of acquiring a capital asset or a business are capitalised, not expensed, which is the distinction that matters when you buy out a competitor’s routes.
Maintenance, Repairs, and Operating Costs Specific to Bus and Coach Fleets
- Routine servicing, tires, brakes and annual inspections are current expenses.
- An engine or transmission replacement that extends the vehicle’s life is a betterment added to Class 10, denied as a current expense by paragraph 18(1)(b).
- Seat and interior refurbishment is usually a repair; a full coach rebuild usually is not.
Staffing Costs: Salaries, Wages, Benefits, and Employer Contributions in the Bus Industry
- Driver, mechanic and dispatch wages are deductible, with the employer’s CPP and EI.
- 2026 figures: CPP at 5.95% between $3,500 and $74,600, CPP2 at 4% to $85,000, EI at 1.63% to $68,900 with the employer at 1.4 times.
- Remittance is due by the 15th of the following month for a regular remitter, sooner above $25,000 average monthly withholding.
- Late remittance costs 3% to 10% under 227(9), and directors are personally liable under 227.1.
Advertising and Marketing Expenses: Guidelines and Canadian Content Requirements
Risk Warning: the advertising rule is about foreign media, not local content. Sections 19, 19.01 and 19.1 deny a deduction for advertising directed primarily at the Canadian market that is placed in a non-Canadian newspaper or periodical, or on a foreign broadcaster.
There is no rule requiring your ads to meet a local content standard. Ordinary marketing, including online advertising, is deductible under 18(1)(a). The trap is buying Canadian-market print or broadcast space in a foreign outlet and expecting a deduction.
Travel, Delivery, Freight, Fuel, and Insurance Expense Considerations for Bus Companies
- Fuel, oil, tolls, washes and roadside costs are deductible with receipts.
- Operators running interjurisdictionally generally need an IFTA licence, with quarterly fuel tax returns and distance records by jurisdiction.
- Fleet, liability and cargo insurance is deductible; insurance is an exempt supply for GST/HST, so there is no input tax credit on premiums.
- Meals for drivers away overnight are limited to 50% under 67.1, and long-haul truck driver relief does not extend to bus operators.
Telephone, Utilities, Office, and Supplies Expenses Deduction for Bus Operators
Phones, dispatch systems, terminal utilities, office supplies and software are deductible in the ordinary way. Where a phone or vehicle is used personally as well, only the business portion is deductible, and the split needs to be supported by something better than an estimate.
Business Structures in Canada: Tax Planning Guide for Bus and Coach Companies
Business Structures
Structure
Sole Proprietorship Tax Considerations for Bus Business Owners
- Business income is reported on Form T2125 with the personal return, taxed at personal rates reaching about 53.5% at the top in Ontario.
- Fuel, repairs, wages paid to others and vehicle costs are deductible.
- Capital cost allowance is claimed on Class 10; the claim is discretionary, so it can be reduced in a low-income year to preserve the pool.
- Business losses reduce other personal income in the year and can be carried back three years or forward twenty.
- Unlimited liability: personal assets stand behind the business, which matters more in passenger transport than in most sectors.
On $500,000 of revenue with $150,000 of deductible costs, the proprietor is taxed personally on the $350,000 profit whether or not it is withdrawn, which is usually the argument for incorporating.
Partnership Tax Planning Specifics for Bus and Coach Service Providers
- A partnership computes income at the partnership level but is not itself taxed; partners report their share.
- T5013 is required where the partnership has combined revenues and expenses over $2 million or more than $5 million in assets, or where a partner is a corporation or another partnership.
- Capital cost allowance is claimed by the partnership, not divided among partners for them to claim separately. Only the resulting income or loss is allocated.
- Allocations must be reasonable; subsection 103(1) lets CRA reallocate where the split is driven by tax rather than by contribution.
Two partners with $800,000 of revenue and $600,000 of expenses each report $100,000 unless the agreement says otherwise.
Corporate Tax Planning for Bus Companies and Advantages of Incorporation
| Item | 2026 Ontario position |
|---|---|
| Small business rate | 12.2% combined on the first $500,000 of active business income |
| General rate | 26.5% combined |
| Top personal rate | About 53.5% |
| Deferral on retained profit | Roughly 41 points at the small business rate |
- Limited liability separates personal assets from operating risk.
- Profits can be retained in the corporation and paid out when needed, which is the deferral above.
- The small business limit is ground down by passive investment income over $50,000 and by taxable capital over $10 million.
- The T2 is filed within six months, with instalments monthly or quarterly for an eligible CCPC.
Timing a coach purchase before year-end still matters, though less than it did: with the half-year rule suspended, the question is simply whether the vehicle is available for use in the year.
A Toronto charter operator with five coaches and just over $2 million of revenue had been claiming maximum capital cost allowance every year on principle, driving the Class 10 pool down fast.
Because the claim is discretionary, we reduced it in two strong years and kept the pool higher. When three coaches were traded in, the larger remaining pool absorbed the proceeds and there was no recapture to report. The deduction was not lost; it was still there when the fleet turned over. Figures changed for privacy.
Maximizing Deductions and Income Splitting for Bus and Coach Businesses
Deductions, Splitting and Asset Timing
Planning
Maximizing Small Business Tax Deductions for Bus Company Operations
| Cost | Treatment | Authority |
|---|---|---|
| Fuel and oil | Current expense | ITA 18(1)(a) |
| Routine repairs and servicing | Current expense | ITA 18(1)(a) |
| Engine replacement or major rebuild | Capitalised to Class 10 | ITA 18(1)(b) |
| Driver wages | Deductible payroll cost | ITA 9 and 18(1)(a) |
| Operating lease payments | Deductible as incurred | ITA 18(1)(a) |
| Capital lease | Interest and CCA, not the payment | ITA 20(1)(a) and 20(1)(c) |
Deposits taken for tours not yet run are included in income under paragraph 12(1)(a), with a reserve available under 20(1)(m) for services to be delivered after year-end. The reserve is claimed on the return and added back the following year; it is not an automatic deferral.
Income Splitting Strategies and Their Application in Bus Company Tax Planning
Risk Warning: the kiddie tax has been replaced by TOSI, and it reaches adults. Since 2018, the tax on split income in section 120.4 applies the top marginal rate to dividends paid to a related individual unless an exclusion applies.
The common exclusions are an excluded business, where the individual works in the business at least 20 hours a week on average; excluded shares, for someone aged 25 or over holding at least 10% of votes and value of a company that is not a services business; and a reasonable return test for those aged 25 or over. Paying dividends to a spouse or adult child who does neither is not income splitting, it is a top-rate tax bill.
- Salary to a family member is deductible where it is reasonable for work actually performed, under section 67.
- Dividends follow share ownership and are tested against TOSI.
- Shareholder loans need written terms and repayment within the 15(2) window.
Capital Asset Management: Optimal Timing for Purchases and Disposals in Bus Businesses
| Event | Rule | Record needed |
|---|---|---|
| Purchase available for use | Full 30% in year one; half-year rule suspended | Invoice plus delivery or in-service date |
| Disposal or trade-in | Lesser of proceeds and cost removed from the class | Sale agreement and disposal record |
| Recapture | Income under 13(1) if the class falls below zero | Class 10 continuity schedule |
| Terminal loss | Deduction under 20(16) if the class empties with cost left | Proof no assets remain in the class |
| Lease against buy | Lessor claims CCA; lessee deducts payments | Lease contract and payment schedule |
Because most operators hold several coaches in one Class 10 pool, a single sale usually just reduces the pool rather than triggering recapture. Terminal losses are rare for the same reason, and only arise when the class empties entirely.
Key Stat: a $600,000 coach now gives $180,000 in year one. Under the old half-year rule it gave $90,000. The suspension applies to eligible property acquired after 31 December 2024 and available for use before 2034.
That changes the lease against buy comparison, because the early cash flow advantage that leasing used to carry has narrowed considerably. Run the comparison on current numbers rather than on a rule of thumb from three years ago.
Balancing Dividends Versus Salary/Bonus for Tax Efficiency in Bus Company Corporations
Owner Compensation and Shareholder Loans
Compensation
| Feature | Salary or bonus | Dividends |
|---|---|---|
| Corporate deduction | Yes | No, paid from after-tax profit |
| RRSP room | Creates it, 18% of earned income | None |
| CPP | Contributions and future benefits | Neither |
| Payroll administration | Source deductions and T4 | T5 only |
| TOSI | Tested for reasonableness under 67 | Tested under 120.4 |
| Bonus accrual | Payable within 179 days of year-end | Not applicable |
Owner-Manager Compensation Planning
A common approach is salary sufficient to generate full RRSP room, with the balance as dividends. An accrued bonus must be paid within 179 days of year-end or subsection 78(4) denies the deduction, which is the deadline most often missed.
Impact on RRSP Contribution Room
RRSP room is 18% of the prior year’s earned income, to the annual maximum. Salary and bonus create it; dividends do not. A coach operator paying $80,000 in salary and $40,000 in dividends deducts the $80,000 corporately and generates room on that amount alone.
Setting Up Private Pension Plans and Managing Shareholder Loans for Bus Company Owners
Eligible Pension Plan Structures
- Individual Pension Plan: a defined benefit plan registered under section 147.1, allowing larger age-related contributions than an RRSP for owners typically 40 and over, with actuarial and filing costs to match.
- Defined contribution registered pension plan: employer and employee contributions to a combined limit, also under 147.1.
- Deferred Profit Sharing Plan: employer-only contributions tied to profits, under section 147, with a limit of half the money purchase limit; connected persons cannot participate.
Tax Issues With Shareholder Loans
Risk Warning: the repayment clock runs from the lender’s year-end, and interest is imputed either way. Under subsection 15(2) a shareholder loan is included in income unless repaid within one year after the end of the corporation’s taxation year in which it was made, and a series of repayments and re-borrowings does not count.
Separately, section 80.4 imputes a taxable benefit at the prescribed rate on any interest-free balance while it is outstanding, even inside the repayment window. Where 15(2) does apply, a later repayment gives a deduction under paragraph 20(1)(j), so the amount is not taxed twice, but the cash flow damage is done.
- Keep a written loan agreement with terms and a repayment schedule.
- Track the balance against the corporation’s year-end, not the calendar.
- Do not confuse draws with expense reimbursements in the ledger.
- Record board approval and tie the balance into the financial statements.
An operator had drawn roughly $140,000 over two years with nothing recorded beyond a due-to-shareholder balance and no agreement. The oldest portion had passed its 15(2) window.
The amount was included in income for the year the loan was made, with a 20(1)(j) deduction available on repayment, and the 80.4 benefit assessed for the period outstanding. Formalising draws as salary or dividends in advance costs nothing; unwinding them afterwards costs interest and a reassessment. Figures changed for privacy.
Practical Tax Planning Tips Tailored For Bus And Coach Company Operators
- Keep an asset register with in-service dates, which drive the claim year.
- Compare lease and buy on current first-year numbers.
- Claim the 20(1)(m) reserve only where services genuinely straddle year-end.
- Classify drivers correctly: employees get T4s and source deductions, genuine contractors get T4As.
- Repay shareholder loans inside the window, or declare the amount properly.
- Use the discretionary CCA claim to manage pools across good and bad years.
Key Tax Reporting Requirements and Forms for Bus Businesses in Canada (T2125, T2042, T2121)
Forms, Deadlines and Records
Filing
Risk Warning: T2042 is farming and T2121 is fishing. Neither has any application to a bus or coach business, and there is no scenario in which a passenger carrier files one.
T2125, Statement of Business or Professional Activities, is the form for an unincorporated bus business, sole proprietorship or partnership alike. A partnership’s income is reported by each partner on their own T2125, with T5013 filed by the partnership where the thresholds are met. An incorporated operator files the T2.
Which Forms Apply to Which Business Type
| Structure | Form | Filed by |
|---|---|---|
| Sole proprietorship | T2125 with the T1 | The owner |
| Partnership | T2125 by each partner; T5013 where thresholds are met | Partners and the partnership |
| Corporation | T2 with Schedules 1, 8, 50, 100, 125 and 141 | The corporation |
| Employees | T4 and T4 Summary | The employer |
| Contractors | T4A where $500 or more is paid for services | The payer |
| GST/HST registrant | GST34 | The registrant |
Deadlines and Common Pitfalls
| Filing | Deadline | Late penalty |
|---|---|---|
| T1 with T2125 | 15 June for self-employed; balance due 30 April | 5% plus 1% per month, ITA 162(1) |
| T2 | Six months after fiscal year-end | 5% plus 1% per month; 10% plus 2% on a repeat |
| T5013 | Five months after the fiscal period | $25 a day, minimum $100, maximum $2,500 |
| T4 slips | Last day of February | $10 a day, $100 to $1,000 for 1 to 50 slips |
| GST/HST | By assigned frequency | 1% plus 0.25% per month, ETA 280.1 |
There is no $100 a day to $7,500 penalty for a late T2. That figure belongs to nothing in this area; the corporate penalty is the percentage in 162(1), plus $1,000 under 162(7.2) for failing to file electronically.
- Treating deposits as non-taxable rather than reserving them properly.
- Maximum CCA claims every year, ignoring the recapture position on trade-ins.
- Charging the wrong GST/HST rate on interprovincial charters under the place of supply rules.
- Late payroll remittances, which carry both penalty and director liability.
Compliance and Record-Keeping Best Practices for Bus Business Tax Planning with Gondaliya CPA
- Separate operating from capital costs at the invoice, not at year-end.
- Keep trip sheets and in-service dates supporting the capital cost allowance claim.
- Keep deposit records showing which amounts relate to trips after year-end.
- Keep IFTA distance and fuel records by jurisdiction where you run interjurisdictionally.
Records are kept six years from the end of the taxation year under subsection 230(4), not from the filing date, with the GST/HST equivalent in ETA 286. Subsection 230(6) concerns records kept outside Canada, which is a different requirement.
GST/HST for Passenger Carriers
- Register once taxable supplies exceed $30,000 over four consecutive quarters, or in a single quarter.
- Domestic fares and charters are taxable at the rate for the place of supply.
- International passenger transport is zero-rated under Schedule VI, Part VII, so you charge no tax and still claim input tax credits.
- Municipal transit services are exempt under Schedule V, which is a different treatment carrying no credits.
Accessing Professional Support: Schedule a Consultation with Gondaliya CPA for Bus Company Tax Advice
Working With Gondaliya CPA
Support
Step-by-step on how to book a consultation
- Call 647-212-9559 or email info@gondaliyacpa.ca.
- Tell us the basics: fleet size, where you operate, and whether you run charters or contracts.
- Choose a time, including evenings and weekends.
- We confirm within one business day.
- Bring your last filed return, asset list with in-service dates, lease agreements and payroll summary.
Value-added services for bus and coach company owners
- Capital cost allowance planning matched to fleet turnover and cash flow.
- Bookkeeping review covering fuel, repairs, deposits and driver pay.
- Cross-border and interjurisdictional reporting, including IFTA and zero-rated trips.
- Payroll and driver classification under the CRA employment status tests.
- GST/HST registration and returns for passenger transport.
- Owner compensation planning with TOSI and shareholder loan balances tested.
Frequently Asked Questions (FAQs) on Bus and Coach Company Tax Planning in Canada
Frequently Asked Questions
FAQ
What are the key deadlines for filing bus company tax returns?+
Self-employed operators file the T1 with T2125 by 15 June, with any balance due 30 April. Corporations file the T2 six months after fiscal year-end, with the balance due two months after year-end or three for an eligible CCPC. T4 slips are due the last day of February.
How does GST/HST apply to bus and coach operators?+
Register once taxable supplies exceed $30,000 over four consecutive quarters or in a single quarter. Domestic fares and charters are taxable at the place of supply rate. International passenger transport is zero-rated under Schedule VI, Part VII, so no tax is charged but input tax credits remain claimable.
What is the half-year rule fraction in capital cost allowance (CCA)?+
It limited the first-year claim to half the normal rate, but it is suspended for eligible property acquired after 31 December 2024 and available for use before 2034. A $600,000 coach in Class 10 now gives $180,000 in year one rather than $90,000.
How should payroll remittances be handled for bus businesses?+
By the 15th of the following month for a regular remitter, more often above $25,000 average monthly withholding, and quarterly for an eligible small employer with a clean record. Late remittance costs 3% to 10% under 227(9), and directors are personally liable under 227.1.
What records must be kept for compliance with CRA rules?+
Invoices, trip sheets, payroll records and slips, fuel and IFTA records, lease agreements, shareholder loan documents and financial statements, for six years from the end of the taxation year under subsection 230(4).
What triggers a CRA review for bus companies?+
Deposits not reconciling to revenue, large repairs that look like betterments, a shareholder loan balance that grows year over year, GST/HST returns that do not tie to reported revenue, and drivers treated as contractors without the substance to support it.
Can losses be carried forward or back in a bus company?+
Non-capital losses can be carried back three years and forward twenty. Net capital losses go back three years and forward indefinitely, but only against capital gains. An acquisition of control restricts the use of prior losses.
How does owner remuneration affect tax planning?+
Salary is deductible to the company, creates RRSP room and CPP entitlement, and carries payroll administration. Dividends are paid from after-tax profit, create no RRSP room, and are tested under TOSI. Most operators use salary to fund RRSP room and dividends beyond that.
What are top tax mistakes bus companies should avoid?+
Maximum CCA claims that leave no pool to absorb trade-in proceeds, deposits recognised as revenue on receipt, shareholder loans left past the 15(2) window, dividends to family members who fail every TOSI exclusion, and late payroll remittances.
Are my drivers employees or contractors?+
Drivers operating your coaches, on your schedule, under your operating authority are almost always employees. The tests are control, ownership of tools, chance of profit and risk of loss. A misclassification assessment covers both sides of CPP and EI plus interest and penalties.
Can I still defer tax by leaving profit in the corporation?+
Yes. At Ontario’s 12.2% small business rate against a top personal rate near 53.5%, the deferral is roughly 41 points until the money is paid out. Passive investment income over $50,000 grinds the small business limit, so the retained funds need watching.
What happens when I trade in a coach?+
The lesser of proceeds and original cost comes out of Class 10. Because most operators keep several vehicles in the pool, this usually just reduces the balance. Recapture arises only if the class goes below zero, and a terminal loss only if it empties with cost remaining.
Quick Answers: Key Numbers & Concepts at a Glance
At a Glance
| Item | 2026 position |
|---|---|
| Coaches and buses | Class 10, 30% declining balance |
| Half-year rule | Suspended for property acquired after 2024 |
| Passenger vehicle ceiling | $39,000, Class 10.1 only, not buses |
| Ontario small business rate | 12.2% combined on the first $500,000 |
| Ontario general rate | 26.5% combined |
| GST/HST registration | $30,000 over four quarters or in one quarter |
| International passenger transport | Zero-rated, Schedule VI Part VII |
| Shareholder loan | One year after the corporation’s year-end, ITA 15(2) |
| Bonus accrual | Paid within 179 days, ITA 78(4) |
| TOSI excluded business | 20 hours a week on average |
| Non-capital losses | Back three years, forward twenty |
| Record retention | Six years from the end of the taxation year |
Who This Is For / Not For
Fit Check
- For: Bus, coach, charter and motorcoach operators managing fleet purchases, driver payroll, advance deposits and cross-border trips.
- Not For: Operators seeking operating authority, safety rating or driver certification guidance, which sit with the provincial transport regulator.
People Also Ask
Quick Answers
What CCA class is a motorcoach?+
Class 10 at 30%. Class 16 covers taxis, short-term rental vehicles and freight trucks over 11,788 kg, not passenger coaches.
Do I charge GST/HST on a charter to the United States?+
No. International passenger transport is zero-rated under Schedule VI, Part VII. You charge no tax and still recover input tax credits on fuel, repairs and the coach itself.
Can I pay my spouse dividends from the bus company?+
Only without penalty if a TOSI exclusion applies, such as working in the business 20 hours a week on average, or holding excluded shares at age 25 or over. Otherwise the dividend is taxed at the top marginal rate.
When do I report a deposit for a tour next season?+
It is included in income under 12(1)(a) when received, with a reserve claimed under 20(1)(m) for the portion relating to services after year-end, added back the following year.
Which form does an unincorporated bus business file?+
T2125. T2042 is farming and T2121 is fishing; neither applies to passenger transport.
Essential Tax Planning Points for Bus & Coach Operators by Gondaliya CPA
Checklist
- Revenue recognition: deposits into income with a 20(1)(m) reserve where trips fall after year-end.
- Fleet costs: current expense or capitalised, decided at the invoice under 18(1)(b).
- Capital cost allowance: Class 10 at 30%, claimed discretionarily, with the half-year rule suspended.
- GST/HST: registered on time, domestic taxable, international zero-rated.
- Payroll: remitted by the 15th or sooner, with director liability in mind.
- Interjurisdictional: IFTA distance and fuel records kept by jurisdiction.
- Shareholder loans: written terms, repaid inside the 15(2) window, 80.4 benefit tracked.
- Driver status: employees on T4s, genuine contractors on T4As.
- Structure: chosen on liability and deferral, not on filing convenience.
- Year-end: reviewed before filing, records kept six years from the year-end.
This quick self-check shows where your fleet and compensation records most likely need attention. Please answer the five questions below.
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Three things move the number on a coach operator’s return, and two of them changed recently. The first is fleet depreciation: coaches sit in Class 10 at 30%, not Class 16, and with the half-year rule suspended a $600,000 coach now gives $180,000 in the first year rather than $90,000. That claim is discretionary, and the operators who take the maximum every year are the ones who find recapture waiting when they trade three coaches in at once, so the pool is worth managing rather than draining. The second is income splitting, where the old kiddie tax has been replaced by TOSI in section 120.4, which taxes dividends to a related person at the top rate unless they work 20 hours a week in the business, hold excluded shares at 25 or over, or meet a reasonable return test. Dividends to a spouse who does none of these are not a plan. The third is unchanged but still missed: deposits for next season’s tours are income when received, with a reserve under 20(1)(m) for the part that straddles year-end, and shareholder draws become income under 15(2) a year after the corporation’s year-end whatever the intention was.
What is current as at 26 September 2026: Bill C-15 received Royal Assent on 26 March 2026 and suspends the half-year rule for eligible property acquired after 31 December 2024 and available for use before 2034, doubling first-year capital cost allowance on coaches, shop equipment and terminal assets. Class 50 computer equipment retains a 100% first-year deduction. The 2026 automobile limits put the Class 10.1 ceiling at $39,000 before tax, with a $1,100 monthly lease cap and $350 monthly interest cap, none of which apply to a bus. 2026 payroll figures: CPP at 5.95% between $3,500 and $74,600, CPP2 at 4% to $85,000, EI at 1.63% to $68,900 with the employer at 1.4 times. Ontario’s combined rates are 12.2% on the first $500,000 of active business income and 26.5% above it. The Voluntary Disclosures Program was revised effective 1 October 2025. Unchanged for 2026: Class 10 at 30% for buses; TOSI in section 120.4 with its 20-hour and excluded share tests; the 15(2) shareholder loan window with the 80.4 imputed benefit and the 20(1)(j) deduction; the 179-day bonus rule in 78(4); the 12(1)(a) and 20(1)(m) treatment of deposits; zero-rating of international passenger transport under Schedule VI, Part VII; the advertising restrictions in sections 19 to 19.1; and six-year retention under 230(4).
Bus and Coach Taxes: How Gondaliya CPA Supports You
Coach on order, deposits taken for next season, or a shareholder loan you have not looked at?
For a flat annual fee stated before the work starts, we plan the capital cost allowance claim around your fleet turnover so the pool absorbs trade-ins instead of producing recapture, reserve advance deposits correctly so next season’s revenue lands in next season, test every dividend recipient against TOSI before the T5s go out, bring shareholder balances inside the 15(2) window, set the GST/HST treatment for domestic and international work, and prepare the T2, payroll and returns that follow.
Next Steps
Book a free consultation with Gondaliya CPA. Bring your last filed return with Schedule 8, your fleet list with in-service and disposal dates, and a summary of how you pay yourself. Those three settle the capital cost allowance position, the recapture exposure and the compensation mix in one sitting. You’ll get a flat fee before any work begins. We serve Toronto, Mississauga, Vaughan, Scarborough, Hamilton and the rest of Ontario, and work remotely across Canada.
Published: · Last updated:
Editorial policy: Classes, rates, provisions and deadlines are verified against the Income Tax Act, the Excise Tax Act, their Regulations and CRA publications before publication, and updated when the rules change.
Disclaimer: This article is educational information only and is not tax, legal, or financial advice. Capital cost allowance, TOSI and shareholder loan outcomes depend on your specific facts. Please speak with a CPA before acting.
Sharad Gondaliya is a CPA Canada & CPA USA with 15 Years+ experience of Accounting, Tax, Payroll of Corporate Small Businesses as Tax Accountant. He is fully certified CPA Ontario and CPA USA and is well known among corporate small businesses for tax planning, efficient tax solutions, and affordable CPA services. Sharad is the Principal (Director) of Gondaliya CPA – Affordable CPA Firm in Canada. Licenses: CPA Ontario: 61040184 | CPA USA (MT): PAC-CPAP-LIC-033176 | CPA USA (WA): 57629 | CPA Firm License: 61330051 View Full Author Bio