Corporate tax
How to take money out of your professional corporation
The six routes out of an Ontario professional corporation, what each one costs, and the order most physicians and dentists should use them in.
6 min read
Physicians
Approaching retirement
Taking the money out costs more than putting it in.
If this is you
- Twenty years of retained earnings, and no written order for taking them out that has been through a tax calculation.
- Nobody has told you whether to wind the corporation up or keep filing for it after your last clinic day.
- Your coverage, your will and your shareholdings were set up for a household that has since changed.
What changes after a review
- A withdrawal order across salary, dividends, the capital dividend account and the shareholder loan, with the tax cost of each shown.
- A decision on keeping or dissolving the corporation, and what that decision does to your estate.
- A plan for the shares that says what happens on the first death and on the second.
Corporate vs. personal investing
Compare investing surplus cash inside your corporation vs. investing it personally.
Illustration only. Figures use Ontario 2026 rates; see the assumptions.
Corporation (after withdrawing as dividend)
$615,055
Personal
$1,096,189
- 1: Corporation $46,799, Personal $52,306
- 2: Corporation $96,406, Personal $107,023
- 3: Corporation $148,989, Personal $164,263
- 4: Corporation $204,728, Personal $224,143
- 5: Corporation $263,810, Personal $286,784
- 6: Corporation $326,438, Personal $352,313
- 7: Corporation $392,823, Personal $420,863
- 8: Corporation $463,192, Personal $492,575
- 9: Corporation $537,782, Personal $567,593
- 10: Corporation $616,848, Personal $646,070
- 11: Corporation $700,658, Personal $728,166
- 12: Corporation $789,496, Personal $814,047
- 13: Corporation $883,665, Personal $903,888
- 14: Corporation $983,484, Personal $997,872
- 15: Corporation $1,089,292, Personal $1,096,189
Passive income crosses $50,000 in year 13.
On these numbers, investing personally leaves about $481,134 more after 15 years.
Assumptions
- 2026 tax year. Sources: CRA T4127 Payroll Deductions Formulas, 122nd Edition, effective Jan 1 2026 (https://www.canada.ca/content/dam/cra-arc/formspubs/pub/t4127-jan/t4127-01-26e.pdf: federal K/V table, Ontario V-table, Ontario surtax V1 formula, Table 8.18 Ontario BPA) and CRA's 2026 indexation adjustment page (https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/adjustment-personal-income-tax-benefit-amounts.html: federal bracket thresholds and BPA). Verify each January.; Ontario 2026 Budget, Annex (https://budget.ontario.ca/2026/annex.html): small business CIT rate cut from 3.2% to 2.2% effective July 1, 2026, prorated for taxation years straddling that date; combined federal+Ontario small business rate falls from 12.2% to 11.2%. Federal small business rate (9%) and general combined rate (26.5%) unchanged, no 2026 change announced.; CRA line 40425, Federal dividend tax credit (https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-40425-federal-dividend-tax-credit.html) for gross-ups and federal credit rates (unchanged for 2026); Ontario 2026 Budget Annex (https://budget.ontario.ca/2026/annex.html) confirms the Ontario non-eligible dividend credit stays 2.9863% through 2026, dropping to 1.9863% only from Jan 1 2027..
- The 11.7 per cent combined small business rate is a calendar-2026 blend of 12.2 per cent to 30 June 2026 and 11.2 per cent after it, because Ontario's lower rate drops on 1 July 2026. Exact proration for a fiscal year straddling that date is not modelled.
- No other personal or corporate income is assumed.
- Both the corp and personal paths are always computed in full for comparison; investInsideCorp only selects which one is reported as `highlighted`.
- Passive investment income earned inside the corporation is not separately taxed in this model (real CCPC passive-income taxation and RDTOH refund mechanics are ignored) — this overstates the corporation's after-tax compounding relative to reality.
- Corporate and personal contributions are assumed invested at the start of each year and compound for the full year (annuity-due convention).
- The small business deduction limit is applied to the annual surplus in isolation each year, not blended with other active business income the corporation may earn.
- Personal-side investment growth is taxed every year at the single marginal rate implied by the salary needed to fund the contribution — a simplification; a real portfolio mixes interest, dividends and capital gains taxed differently.
- sbdGrindStartYear flags the first year passive income (plus any passiveIncomeAlready) exceeds the $50,000 grind threshold; it does not model the resulting gradual reduction of the small business limit toward $150,000.
- Ignores the Ontario Health Premium.
Worth reading first
Corporate tax
The $50,000 passive income rule and your small business limit
How passive investment income above $50,000 grinds a professional corporation's small business limit, what the grind really costs, and what to do about it.
6 min read
Corporate tax
Salary or dividends for an incorporated physician in 2026?
Integration makes the tax cost of salary and dividends close. What separates them is RRSP room, CPP, HOOPP eligibility and the passive income grind.
7 min read
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