Salary vs. dividends
Compare paying yourself salary vs. dividends from your professional corporation.
Illustration only. Figures use Ontario 2026 rates; see assumptions.
Total tax — salary
$76,559
Total tax — dividends
$65,528
- Total tax: Salary $76,559, Dividends $65,528
- Retained in corp: Salary $103,441, Dividends $114,472
On these numbers, dividends leaves about $11,032 more after tax.
| Salary | Dividends | |
|---|---|---|
| Personal tax | $53,560 | $30,428 |
| CPP | $9,293 | $0.00 |
| Corporate tax | $13,706 | $35,100 |
| Retained in corporation | $103,441 | $114,472 |
| Net to you | $120,000 | $120,000 |
| RRSP room created | $32,077 | $0.00 |
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..
- Assumes no other personal income unless supplied via otherPersonalIncome.
- CPP (employee + employer) is treated as a cost inside totalTax for the salary path, even though it purchases future CPP retirement benefit entitlement rather than being a pure tax.
- 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.
- Ignores the Ontario Health Premium on personal income.
- Dividends are assumed non-eligible, paid out of income already taxed at the small business rate.
- RRSP room created is a tax deferral, not a tax saving — contributions are still taxed on withdrawal.