Dividend vs Salary Calculator
Compare tax implications of salary versus dividends from your Canadian-controlled private corporation (CCPC).
Quick Comparison: $100,000 Personal Income
Ontario
| Method | Corporate Tax | Personal Tax | CPP | Total Tax | Net Cash |
|---|
| All salary | $0 | $22,000 | $4,066 | $26,066 | $73,934 |
| All dividends | $12,200 | $8,900 | $0 | $21,100 | $78,900 |
| Mixed optimal | ~$3,000 | $16,500 | $4,066 | $23,566 | $76,434 |
Dividends often lower tax but no CPP/RRSP room
Tax on Salary vs Eligible Dividends
To Net $50,000 After Tax (Ontario)
| Payout Type | Gross Needed | Corporate Tax | Personal Tax | Total Tax |
|---|
| Salary | $67,000 | $0 | $13,000 | $13,000 |
| Eligible dividend | $62,000* | $7,560 | $4,300 | $11,860 |
*Corporation needs to earn $69,560 to pay $62,000 dividend after corp tax
To Net $100,000 After Tax (Ontario)
| Payout Type | Gross Needed | Corporate Tax | Personal Tax | Total Tax |
|---|
| Salary | $145,000 | $0 | $41,000 | $41,000 |
| Eligible dividend | $125,000 | $15,250 | $18,500 | $33,750 |
Salary Advantages
| Benefit | Value |
|---|
| RRSP contribution room | 18% of salary (max $32,490) |
| CPP retirement benefits | Up to $1,433/month at 65 |
| Corporate deduction | Reduces corporate income |
| Income splitting (wages) | Pay family for real work |
| Predictable tax withholding | Pay-as-you-go |
Dividend Advantages
| Benefit | Value |
|---|
| No payroll administration | Simpler |
| No CPP contributions required | 11.9% saved |
| Lower overall tax (sometimes) | See calculations |
| Flexibility | Take when needed |
| Dividend tax credit | Reduces personal tax |
Optimal Strategy: Mixed Approach
$150,000 Corporate Profit Available
Recommendation: Salary first, dividends for the rest
| Component | Amount | Why |
|---|
| Salary | $175,333 | Maxes RRSP room |
| RRSP contribution | $31,560 | 18% of salary |
| CPP contributions | $8,132 | Both portions |
| Eligible dividend | $80,000 | Lower tax rate |
| Tax Impact | Amount |
|---|
| Corporate tax saved | $21,400 (salary deduction) |
| Personal tax (salary) | $38,500 |
| Personal tax (dividends) | $8,800 |
| Total tax | $47,300 |
| Total net | $102,700 |
Salary to Maximize RRSP
| Year | RRSP Max | Salary Needed |
|---|
| 2024 | $31,560 | $175,333 |
| 2025 | $32,490 | $180,500 |
| 2026 | ~$33,500 | ~$186,000 |
If you want full RRSP room, take at least this much salary.
Corporate Tax Integration
The system is designed so you pay roughly the same tax whether:
- Corporation pays tax + you pay dividend tax, OR
- Corporation deducts salary + you pay income tax
Integration Example: $100,000 Corporate Profit
| Path | Corporate Tax | Personal Tax | Combined |
|---|
| Salary route | $0 | $29,500 | $29,500 |
| Dividend route | $12,200 | $16,900 | $29,100 |
Slight dividend advantage due to imperfect integration
Provincial Variations
Dividend vs Salary Tax (on $80K personal income)
| Province | Salary Tax | Dividend Tax | Savings |
|---|
| Alberta | $17,500 | $14,200 | $3,300 |
| BC | $16,500 | $14,000 | $2,500 |
| Ontario | $18,200 | $15,100 | $3,100 |
| Quebec | $22,500 | $19,000 | $3,500 |
Decision Framework
Take Salary If:
| Situation | Reason |
|---|
| Want RRSP room | Need earned income |
| Want CPP benefits | Only from salary |
| Corporate losses | Use salary to absorb |
| Income <$60K | Marginal rates similar |
Take Dividends If:
| Situation | Reason |
|---|
| Don’t need RRSP room | Already maxed or don’t want |
| Don’t want CPP | Have other retirement |
| High-income bracket | Lower rate on dividends |
| Simplicity priority | No T4 processing |
Take Both If:
| Situation | Approach |
|---|
| Want retirement benefits | Salary to max RRSP/CPP |
| Want tax efficiency | Dividends for the rest |
| Income over $100K | Best of both worlds |
CPP Consideration
Salary of $68,500 (2026 max)
| Benefit | Value |
|---|
| CPP at 65 (max) | ~$1,433/month |
| Total lifetime CPP | ~$240,000+ |
| Your CPP contribution | ~$4,066/year |
| Employer (corp) contribution | ~$4,066/year |
Example: Professional Corporation
Dentist earning $300,000 in corp
| Strategy | Tax Outcome |
|---|
| All salary | $120,000 tax |
| All dividends | $95,000 tax |
| Optimal mix | $85,000 tax |
Optimal mix saves $35,000/year
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