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
Services
Corporate tax planning
How you pay yourself, what you leave in the corporation, and what the small business rate is worth to you in 2026. Ontario's blended combined small business rate is 11.7 per cent; the top personal rate is 53.53 per cent.
What we read
- Your last corporate return and notice of assessment, with the schedules.
- Your certificate of authorization from CPSO or RCDSO, and who holds which class of shares.
- Last year's T4 and T5 slips, and the shareholder loan balance.
- The corporation's adjusted aggregate investment income for the last two years.
What we assess
- Whether your salary and dividend split matches what you actually want out of it.
- How close the corporation is to the $50,000 passive income threshold, and what that costs at your income.
- Whether paying family members stands up to the split income rules.
- What your accountant needs to know before the year end rather than after it.
The trade-off
| Salary | Dividends | |
|---|---|---|
| RRSP room | Creates room at 18 per cent of earned income, up to the annual limit. favourable | Creates none. Dividends are not earned income. |
| Canada Pension Plan | Costs both the employee and employer share, and builds the pension credit. | No contribution, and no credit built. |
| HOOPP eligibility | A salary is what makes participation possible for an incorporated physician. favourable | Dividends alone do not. |
| Filing work | Payroll account, remittances through the year, T4s in February. | A T5 and a dividend resolution. favourable |
| Tax cost overall | Close to dividends. Integration is designed to make the two comparable, and CPP is most of what separates them. | About 2 to 4 points of the corporation's pre-tax income cheaper on our 2026 figures, mostly because salary pays both halves of CPP. |
| Effect on the small business limit | Reduces active income, so less is left to be taxed at the small business rate. | Paid out of income already taxed in the corporation. |
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