Tools
Salary vs Dividend Calculator for Ontario
Compare what you keep when your Ontario corporation pays you a salary or dividends. This salary vs dividend calculator uses 2026 federal and Ontario rates for corporate tax, personal tax and CPP. Treat the result as an estimate, and check the assumptions below it.
Compare Salary and Dividends for 2026
Estimates for an Ontario resident who owns a Canadian-controlled private corporation, has no other income and is exempt from EI, using 2026 federal and Ontario rates. Not tax advice.
| 2026 estimate | Salary | Dividends |
|---|---|---|
| Paid to you before personal tax | ||
| Corporate tax | ||
| CPP (you and your company) | ||
| Personal income tax | ||
| Total tax and CPP | ||
| Cash in your pocket | ||
| RRSP room created for 2027 |
How the comparison works
Salary and dividends are taxed at different stages. A salary is a business expense, so the corporation pays no corporate tax on it, but you pay personal tax and CPP on it. A dividend comes out of profit the corporation has already paid tax on, and the dividend tax credit then reduces your personal tax on it.
| Step | Salary | Non-eligible dividend |
|---|---|---|
| Corporate tax | None on the salary. Salary and the corporation’s share of CPP are deductible expenses. | The corporation pays tax on its profit first, at the combined small business rate, and pays the dividend from what is left. |
| Personal tax | Federal and Ontario tax at your regular rates. | You report 115% of the dividend, then claim the federal (9.0301%) and Ontario (2.9863%) dividend tax credits on that grossed-up amount. |
| CPP | You and the corporation each pay 5.95% on salary from $3,500 to $74,600, and 4% each on salary from $74,600 to $85,000 (CPP2). | None. |
| EI | None, based on the assumption below that your salary is exempt. | None. |
| RRSP room | 18% of your salary becomes RRSP room for the next year, up to the annual limit. | None. |
| Paperwork | A payroll account, regular source deduction remittances and a T4 slip. | A T5 slip. |
The gross-up and dividend tax credit exist to avoid taxing the same income twice. Finance Canada describes the credit as generally meant to make income paid out as a dividend bear the same tax as income you earn directly. The match is not always exact, partly because rates change at different times: Ontario cut its small business rate on July 1, 2026 and cuts its dividend credit on January 1, 2027. The calculator shows the difference for your numbers.
Sources: Finance Canada: Report on Federal Tax Expenditures 2026 (dividend gross-up and tax credit), CRA: Business expenses, salaries, wages and benefits (T4002) and CRA: Completing the T5 slip.
The 2026 rates behind the numbers
These are the main 2026 figures behind the comparison. For federal and Ontario brackets, credits, the Ontario surtax and the Ontario Health Premium, see our Canadian tax rates and limits for 2026. The calculator lets you pick which combined small business rate applies to your corporation’s tax year.
| Item | 2026 figure |
|---|---|
| Federal small business rate | 9% |
| Ontario small business rate | 3.2% to June 30, 2026; 2.2% from July 1, 2026 |
| Combined small business rate (derived) | 12.2% to June 30, 2026; 11.2% from July 1, 2026; about 11.7% for a tax year ending December 31, 2026 |
| Small business limit | $500,000 of active business income a year |
| Non-eligible dividend gross-up | 15% |
| Federal dividend tax credit, non-eligible | 9.0301% of the grossed-up dividend |
| Ontario dividend tax credit, non-eligible | 2.9863% of the grossed-up dividend (1.9863% from January 1, 2027) |
| CPP, you and the corporation each | 5.95% of salary from $3,500 to $74,600, up to $4,230.45 each |
| CPP2, you and the corporation each | 4% of salary from $74,600 to $85,000, up to $416 each |
| EI | Not included (see the assumptions below) |
Sources: CRA: Corporation tax rates, Ontario: Corporate income tax, CRA: Lines 12000 and 12010, taxable dividends, Ontario: Ontario dividend tax credit, CRA: CPP contribution rates, maximums and exemptions and CRA: CPP2 rates and maximums.
What the calculator assumes
To keep the comparison clear, the calculator makes these assumptions. If one of them doesn’t fit you, your real numbers will be different.
- You live in Ontario and pay Ontario personal income tax.
- Your corporation is a Canadian-controlled private corporation (CCPC) and all of its profit qualifies for the small business deduction, so it is taxed at the combined small business rate on up to $500,000 of active business income.
- No EI on your salary. Neither you nor the corporation pays EI premiums. Check that this applies to you. People who control more than 40% of a corporation’s voting shares can opt in to EI special benefits as self-employed people.
- No other income, such as a salary from another employer, rental income or investment income.
- 2026 rates for federal and Ontario tax, credits and CPP. Personal tax includes the Ontario surtax, the Ontario Health Premium and the basic Ontario tax reduction for a single person.
- No RRSP or passive income effects. The calculator does not deduct RRSP contributions, and it assumes your corporation has $50,000 or less of passive investment income, so its federal small business limit is not reduced.
- No Employer Health Tax. Eligible Ontario employers don’t pay it on their first $1 million of Ontario payroll, and associated employers share that exemption.
The results are estimates to help you think through the choice. They aren’t tax advice and won’t match your return to the dollar.
Sources: CRA: T2 guide, small business deduction, Government of Canada: EI for self-employed people, eligibility and Ontario: Employer Health Tax.
What the calculator doesn’t capture
Some of the biggest differences between salary and dividends don’t show up in one year’s tax bill.
- RRSP room. Salary counts as earned income for RRSP purposes and dividends don’t. Each dollar of 2026 salary adds 18 cents of RRSP room for 2027, up to the $35,390 limit, which takes a 2026 salary of about $196,611 (derived). Dividends alone build no new room.
- CPP retirement benefits. CPP on a salary costs you and the corporation money now, but your CPP retirement pension depends on how much and for how long you contribute. Dividends build no CPP.
- Child care expense limits. The child care expense deduction can’t be more than two-thirds of your earned income. Salary counts as earned income for this rule; dividends don’t.
- Tax on split income (TOSI). Dividends a family member receives from a related business can be taxed at the top marginal rate unless an exclusion applies, for example working in the business an average of at least 20 hours a week. TOSI applies to dividends, not salary. The calculator looks at one owner only.
- Ontario’s 2027 dividend credit change. On January 1, 2027, Ontario’s credit on non-eligible dividends falls from 2.9863% to 1.9863% of the grossed-up dividend. Dividends you receive in 2027 will generally face more Ontario tax than the calculator’s 2026 figures show.
Sources: CRA: How contributions affect your RRSP deduction limit, CRA: RRSPs and Other Registered Plans for Retirement (T4040), CRA: RRSP limits, Government of Canada: CPP retirement pension amount, CRA: Income Tax Folio S1-F3-C1, Child Care Expense Deduction, CRA: Guidance on the split income rules for adults and 2026 Ontario Budget, annex.
When mixing salary and dividends makes sense
You don’t have to pick one. Your corporation can pay you a salary and dividends in the same year, and a mix is worth a look when one of these applies to you.
- You want CPP and some RRSP room. In 2026, a salary of $85,000 or more maxes out your CPP and CPP2 contributions, and $85,000 of salary creates $15,300 of RRSP room for 2027 (derived). Dividends can cover the rest of what you need.
- You claim child care expenses and need earned income to support the deduction.
- Your profit swings from year to year. A salary runs through payroll on a fixed schedule, while dividends can be declared once you know how the year went.
- You want tax taken off as you go. Salary has tax withheld at source. Dividends don’t, so if your net tax owing is more than $3,000 this year and in either of the two previous years, you may have to pay quarterly tax instalments.
The right mix depends on your income, your family, your corporation’s plans and the changes coming in 2027. Our tax planning for incorporated business owners works through these questions with you, and our payroll services can run the salary side.
Source: CRA: Who has to pay instalments.
Get help choosing your salary and dividend mix
The calculator gives you a starting point. In a free intro call, we’ll look at your corporation’s numbers, your RRSP and CPP goals and your family situation, and talk through a pay plan for the rest of 2026 and for 2027. Meet us at our Westboro office in Ottawa or online.
Salary vs Dividend FAQ
Is it better to pay yourself salary or dividends in Ontario?
Neither is better in every case. The dividend tax credit is designed so the total tax on a dividend lands close to the tax on the same income earned directly, so the choice often turns on other things: CPP, RRSP room, child care expenses, cash flow and whether family members receive dividends. The calculator shows the tax difference for 2026; the rest depends on your plans.
Do I pay CPP on dividends?
No. CPP is deducted from employment earnings such as salary, wages, commissions and bonuses, not from dividends. You save the contributions now, but dividends don’t build your CPP retirement pension.
Do dividends create RRSP room?
No. RRSP room is 18% of your previous year’s earned income, and earned income includes salary but not dividends. A salary paid in 2026 creates room for 2027, up to the $35,390 limit.
What changes for dividends paid in 2027?
Ontario’s dividend tax credit on non-eligible dividends falls from 2.9863% to 1.9863% of the grossed-up dividend on January 1, 2027, to line up with Ontario’s lower small business rate. The calculator uses 2026 rates, so it doesn’t show this change.
Do I need a payroll account to pay myself a salary?
Yes. Your corporation needs a payroll (RP) program account with the CRA before its first remittance is due, it must remit source deductions, and it must give you a T4 slip. For 2026, T4 and T5 slips are due Monday, March 1, 2027, because February 28, 2027 is a Sunday. Dividends need a T5 slip but no payroll account. See every date on our Canadian tax deadlines page.
Guides for paying yourself from your corporation
Go deeper with these guides from the BBA Tax blog:
- How to Pay Yourself as a Small Business Owner in Canada?
- Dividend Tax in Canada: How Dividends Are Taxed in 2026
- Income Splitting in Canada: What Still Works in 2026
- Holding Company in Canada: Should Your Ottawa Business Set One Up in 2026?
- Personal Services Business Rules in 2026: Is Your Ottawa Consulting Corporation at Risk?
- RRSP vs TFSA: Which Should You Contribute To in 2026?
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