Pre-tax corporate earnings you want to pay yourself
Spouse income, rental, investment income — affects your marginal rate
Note: This calculator uses 2026 corporate and personal tax rates. Salary scenario creates RRSP room ($18 per $100 of salary). Consult a CPA before making remuneration decisions.
Salary vs. Dividend — FAQ
Should I pay myself salary or dividends from my corporation?
The right answer depends on your province, income level, RRSP room, and personal goals. Salary is generally better when you have unused RRSP room, want CPP benefits, or are in a lower personal tax bracket than your corporation's rate. Eligible dividends tend to win at higher incomes when the integrated tax rate is lower. Most incorporated owners use a mix: enough salary to maximize RRSP room, and dividends for the rest.
What is the dividend tax credit and gross-up?
Canada uses a "dividend integration" system to avoid double taxation. Dividends are "grossed up" (increased) to represent the pre-corporate-tax income, then taxed at personal rates. A dividend tax credit (DTC) offsets the corporate tax already paid. Eligible dividends use a 38% gross-up + higher DTC (approximately 15% federal). Non-eligible dividends use a 15% gross-up + lower DTC (~9% federal).
What are the advantages of paying salary from a corporation?
Key salary advantages: (1) RRSP room — 18% of salary, up to $31,560 for 2026. (2) CPP entitlement — salary builds your future CPP pension. (3) Employment credits — access to various personal deductions requiring employment income. (4) Simpler integration — the corporate deduction and personal income are symmetrical. Salary is always fully deductible for the corporation.
What are eligible vs. non-eligible dividends?
Eligible dividends are paid from corporate income taxed at the general corporate rate (no Small Business Deduction). In Ontario, for example, the general rate is ~26.5%. Non-eligible dividends are paid from SBD income (typically the first $500,000 of active business income), taxed at ~12.2% in Ontario. Eligible dividends receive better personal tax treatment because more corporate tax was already paid.
How does province affect salary vs dividend decisions?
Significantly. The Small Business Deduction rate varies by province (8.5%–12.5%), and provincial dividend tax credits vary widely. Alberta's integrated rates generally favour dividends. Nova Scotia and Newfoundland have higher combined rates overall. Quebec has its own abatement that changes the calculation substantially. Always model your specific province using the calculator above.