Salary or dividends: run your own number

Methodology, assumptions, and simplifications

This model uses the 2025 tax year, Ontario, throughout. Corporate tax: 12.2% combined (9% federal, 3.2% Ontario) on the first $500,000 of active business income eligible for the small business deduction, and 26.5% combined above that; dividends from the small business portion are modelled as non eligible and dividends from the general rate portion as eligible. Salary is fully deductible to the corporation, so the all salary scenario shows no corporate tax on this amount. CPP uses the CRA's 2025 figures: $3,500 basic exemption, maximum pensionable earnings $71,300 at 5.95% per side, and the second tier to $81,200 at 4% per side. Personal tax uses the 2025 federal brackets (first bracket 14.5%) and Ontario brackets, the maximum federal basic personal amount of $16,129, the Ontario basic personal amount of $12,747, the Ontario surtax (20% over $5,710 of Ontario tax and a further 36% over $7,307, calculated before dividend tax credits), the Ontario Health Premium, the statutory gross ups (15% non eligible, 38% eligible), and the federal and Ontario dividend tax credits (9.0301% and 2.9863% non eligible; 15.0198% and 10% eligible, each on the grossed up amount).

Simplifications, stated plainly: the model assumes this compensation is your only income, that the small business deduction is fully available to your corporation (no associated corporation sharing, no taxable capital grind, no passive income grind), and that you have no deductions or credits beyond the basic personal amounts and the dividend tax credits shown. Employee CPP contributions receive a simplified treatment as a credit at the lowest combined rate; the real split between the base credit and the enhanced deduction is not modelled. Employment Insurance is excluded, because an owner manager who controls more than 40% of the corporation's voting shares is generally not insurable for EI; if EI applied to you, salary results would change. The federal basic personal amount is used at its maximum; at incomes between $177,882 and $253,414 (2025) it phases down, which would raise the salary scenario's tax slightly. Results are educational estimates, not tax advice, and your accountant should confirm any actual pay plan.

Sources: Canada Revenue Agency, corporation income tax rates, CPP contribution rates and maximums for 2025, and RRSP dollar limits ($32,490 for 2025); Government of Canada, 2025 federal tax brackets and basic personal amount; Ontario Ministry of Finance, 2025 brackets, basic personal amount, surtax thresholds, and Health Premium schedule; Raymond Chabot Grant Thornton 2025 tax tables for dividend tax credits, cross checked against TaxTips.ca. Rates verified October 2026.