FREE TOOL · ONTARIO · 2026 RATES
Salary vs Dividend Calculator for Ontario Business Owners
Enter what your corporation earns and how much cash you need. See what each way of paying yourself costs, which leaves the most money in your company, and how the 2026 and 2027 Ontario changes affect your numbers.
Enter your numbers to compare.
| All dividends | Salary to CPP max, then dividends | All salary | Your mix |
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Money left in your corporation at each salary level
Your cash in hand is the same at every point. Higher is better.
Estimates for planning only, not tax advice. Assumes an Ontario resident who owns more than 40% of a Canadian-controlled private corporation (so no EI), active business income eligible for the small business deduction, non-eligible dividends, and no other credits or deductions. Uses 2026 federal and Ontario rates published by the CRA. The 2027 preview applies announced changes to 2026 brackets.
How This Calculator Works
Tell the calculator how much profit your corporation earns before paying you, and how much after-tax cash you need for the year. It then works out four ways of getting you that cash: all dividends, salary up to the CPP maximum with dividends on top, all salary, and a mix you choose with the slider.
Your cash in hand is identical in every column, so the fair comparison is what each option leaves behind in the corporation. The option that leaves the most is the cheapest way to pay yourself this year.
- Salary is deducted by the corporation, along with the employer’s share of CPP. You pay personal tax and your own CPP on it.
- Corporate tax is charged at the small business rate on whatever profit is left after salary.
- Dividends are paid from after-tax profit. They are grossed up by 15% on your return and reduced by the federal and Ontario dividend tax credits.
- Personal tax includes federal tax, Ontario tax, the Ontario surtax and the Ontario Health Premium, using the 2026 brackets and credits.
For the reasoning behind the numbers, see our salary vs dividends worked example and the wider tax planning guide for owner-managers.
What Changed for 2026 and 2027
Four announced changes move the salary and dividend math, and they pull in different directions.
| Change | When | Effect |
|---|---|---|
| Lowest federal tax rate cut to 14% | 2026 tax year | Less personal tax on both salary and dividends |
| Ontario small business tax rate cut from 3.2% to 2.2% | July 1, 2026, prorated for straddling years | Combined rate falls from 12.2% to 11.2%, or about 11.70% for a calendar 2026 year. More profit stays in the corporation. |
| Ontario non-eligible dividend tax credit cut from 2.9863% to 1.9863% | January 1, 2027 | More personal tax on dividends from small business income |
| Base CPP contribution rate cut from 4.95% to 4.75% each | January 1, 2027 (announced April 2026) | Salary becomes slightly cheaper for both you and the corporation |
Switch the calculator to 2027 preview to see the net effect on your own numbers. The preview applies the announced rate changes to 2026 brackets, because 2027 brackets have not been published yet. The Ontario changes come from the 2026 Ontario Budget, and the 2026 federal and Ontario rates from the CRA’s payroll deductions formulas.
How to Read the Results
Dividends usually leave more money behind this year. Most of the difference is CPP. Salary costs CPP contributions from both you and the corporation, and dividends do not.
CPP is not a tax. It buys a pension that is indexed to inflation and paid for life. The dashed line on the chart counts those contributions as your own savings. Seen that way, the options are usually within a few thousand dollars of each other. That closeness is what the tax system calls integration.
Salary creates RRSP room of 18% of the salary, up to the annual limit. Dividends create none. If you want to use an RRSP, or you claim child care expenses, you need some salary.
Other things the numbers do not capture include mortgage applications, where lenders read T4 income more easily, and the passive income rules. Paying family members also has its own rules. Our guide to how to do payroll in Canada covers what running salary involves, including payroll remittances.
Assumptions and Limits
- You live in Ontario and own more than 40% of a Canadian-controlled private corporation, so your salary is exempt from EI.
- All profit is active business income under the $500,000 small business limit. The calculator caps profit at $500,000.
- Dividends are non-eligible dividends paid from income taxed at the small business rate.
- No other credits or deductions are included, such as RRSP contributions, donations, medical expenses, spousal amounts or the Ontario LIFT credit. LIFT only applies at low incomes.
- Payroll stays under the $1 million Ontario Employer Health Tax exemption.
- “Left in corporation” is shown after corporate tax. It will be taxed again when you eventually pay it out, but the comparison is fair because your cash this year is the same in every option.
- Results are estimates for planning and are not tax advice. Your actual tax depends on your full return.
Frequently Asked Questions
For this year’s cash alone, dividends usually come out ahead, mainly because they avoid CPP. Once you count CPP as savings and value RRSP room, the gap is small. Most owner-managers end up with a mix: enough salary to reach the CPP maximum or fill RRSP room, then dividends for the rest.
For 2026, salary of $74,600 reaches the maximum for base and first additional CPP. Salary up to $85,000 also attracts the second additional contribution, known as CPP2. Above $85,000, salary earns no further CPP.
Dividends paid on or before December 31, 2026 use the current Ontario credit, so they are taxed slightly less than the same dividends paid in 2027. Whether to pay more out early depends on your bracket this year and next, and on whether you need the cash. Pulling income forward can cost more than it saves if it pushes you into a higher bracket. Run both years in the calculator, then talk to us before your corporation’s year end.
Not yet. Provincial rates, surtaxes and dividend credits differ enough that the results would be wrong for other provinces.
Want This Run on Your Own Numbers?
We model salary, dividends and the mix for your corporation, including retained earnings, RRSP plans and family members. We then set up the payroll or the dividend resolutions to make it happen.