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Prisma Financial

Salary vs Dividend Calculator

Enter your Ontario corporation's annual profit and your desired take-home to compare the real after-tax cost of paying yourself salary versus dividends. Uses 2026 federal and Ontario rates.

$150,000
$30K$500K
$80,000
$30K$250K

Salary

Net take-home
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Corporate tax
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Personal income tax
--
CPP (employee)
--
EI (employee)
--
Total tax burden
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Effective rate
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Dividends

Net take-home
--
Corporate tax
--
Personal income tax
--
CPP
-
EI
-
Total tax burden
--
Effective rate
--

Estimates use 2026 federal and Ontario rates. Assumes single income source, Ontario resident, no other credits or deductions. Employer CPP and EI included in total tax burden. Not tax advice - consult a CPA for your situation.

How this calculator works

Salary path

Salary is deductible to the corporation, reducing corporate taxable income. The corporation also pays employer CPP and EI on top of the gross salary. You pay personal income tax, employee CPP, and employee EI. Total tax burden includes all of these - employer costs are a real cash outflow from the corporation.

Dividend path

The corporation pays Ontario small business rate tax (12.2%) on its full profit first. The remaining after-tax pool is available as dividends. Dividends paid from small-business-rate income are "other than eligible" - they use a 15% gross-up and a reduced dividend tax credit. No CPP or EI applies.

Common questions

What business owners ask most when choosing between salary and dividends.

  • What is an "other than eligible" dividend?
    Dividends paid from corporate income taxed at the small business rate. Most owner-managed corporations in Ontario pay other than eligible dividends on active business income under $500,000. Eligible dividends come from income taxed at the general corporate rate.

  • Why might salary be better even if dividends have lower tax?
    Salary creates RRSP contribution room (18% of earned income, up to the annual limit), builds CPP entitlements for retirement, and is fully deductible to the corporation. Dividends skip CPP but forfeit those benefits. The right answer depends on your retirement plan and cash flow.

  • Can I pay myself a mix of salary and dividends?
    Yes, and most accountants recommend a mix optimized annually based on your personal income, RRSP room, and corporate profit. This calculator shows the two pure scenarios to illustrate the trade-off. Your CPA can model the optimal split for your situation.

  • How accurate is this calculator?
    It is accurate for a single income source in Ontario with no other credits, deductions, or carryforwards. Real situations vary - RRSP contributions, other income, prior losses, and other credits will all change the result. Use this as a starting point, not a filing tool.

Get a free quote

Tell us your corporate structure and desired income. We respond within one business day with a recommendation and a flat CAD price.

Prefer email? Write to support@prismaaccounting.com.