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Inc tax is what a corporation pays on its profit. For a Canadian-controlled private corporation in Ontario it comes to about 11.2% on the first $500,000 once the 2026 rate cut is in full effect. We’re assuming “inc” means an incorporated business, since the phrase has no fixed meaning. The same profit earned by a corporation that doesn’t qualify for the small business rate is taxed at 26.5% combined.
How much inc tax does a corporation pay?
Two federal rates matter. The CRA lists a general rate of 15% after the general tax reduction. A Canadian-controlled private corporation (CCPC) that claims the small business deduction pays 9% instead, on up to $500,000 of qualifying active business income a year. In plain terms, a CCPC is a private company controlled by Canadian residents, and the CRA’s rules spell out the finer points.
| Federal rate | Who gets it | Tax on $100,000 |
|---|---|---|
| 9% | CCPC, on the first $500,000 of active business income | $9,000 |
| 15% | Other income and other corporations | $15,000 |
The $500,000 limit is shared between associated corporations. Two associated companies can’t each take the full amount, which the CRA shows with a $700,000 example split across two of them. The CRA also has rules that shrink the limit when a corporation has large taxable capital or a lot of investment income, and our tools ignore both. The CRA’s corporation tax rates page sets out the federal and provincial rates side by side.
What does Ontario add?
The CRA lists an Ontario general rate of 11.5%. The Ontario small business rate is 3.2%, and the CRA says it drops to 2.2% from 1 July 2026. Add federal and provincial, and the picture for a CCPC on $100,000 looks like this.
| Case | Combined rate | Tax on $100,000 |
|---|---|---|
| CCPC, small business rate, after the cut | 11.2% | $11,200 |
| CCPC, small business rate, before the cut | 12.2% | $12,200 |
| General rate | 26.5% | $26,500 |
The gap is the point. On the same $100,000, the general rate takes $15,300 more than the small business rate after the cut, which is the difference between $26,500 and $11,200.
What about a year that straddles 1 July? Prorated by days. Our corporate tax calculator uses a blend for a calendar 2026 year and shows $11,696 on $100,000. That blend is our own derivation, not a published rate, so your accountant’s figure may differ by a little.
What happens above the limit?
Only the first $500,000 gets the low rate, and that catches owners out the year profit jumps. Take a CCPC with $800,000 of active business income. Federal tax is $45,000 on the first $500,000 at 9% and $45,000 on the remaining $300,000 at 15%, so $90,000 in all. Our tool adds Ontario for a total of $137,980, a ballpark average of 17.2% (with the 2026 blend included).
That gap is why owners talk about splitting income between companies. Careful, though. Associated companies share one limit, so splitting may get you nothing at all, which is why you should ask an accountant before you pay to set up a second company just to chase a lower rate on the same profit.
Is the corporation’s tax the end of it?
No.
When the money leaves the company as a dividend, you pay personal tax on it. The dividend tax calculator shows how the gross-up and credit work on that second layer. Salary is another way to pay yourself, and then payroll remittances apply, which the payroll remittance calculator estimates.
Whether the low rate saves you anything depends on when the money comes out. Leave the profit inside the company and you keep the difference for now. Need the cash personally, and the second layer of tax arrives. Picture Dana, who runs a design studio in Hamilton and leaves $60,000 of after-tax profit in the company for a rainy day. It stays taxed at the corporate rate until she pays it out, and the second layer waits until then.
When do you pay and file?
The T2 return is due six months after the company’s year end. The tax balance is due two months after year end, or three months for many small CCPCs. Your bookkeeping needs to be in shape well before those dates, which is where a monthly routine pays off.
Common mistakes with corporate tax
- Assuming your company gets 9%. Only a CCPC does, and only up to the limit.
- Using last year’s Ontario small business rate for a year that straddles 1 July 2026.
- Forgetting GST/HST, payroll and instalments, which are separate from the tax on profit.
- Treating our calculator as a return. It ignores the passive income and taxable capital rules, associated companies and credits.
You may be in another province. We haven’t confirmed those here. Quebec, for example, has its own timing for the cut, and we couldn’t read its official page. Use the provincial page for any province other than Ontario.
Where the numbers come from
Federal rates and the $500,000 limit are from the Canada Revenue Agency corporation tax rates page. The Ontario rates and the 1 July 2026 cut are from the CRA Ontario corporation tax pages and its what’s new page for corporations. The calendar 2026 blend is a derived figure. We aren’t a government service and we don’t speak for one.
Frequently asked questions
What is the federal tax rate for a corporation?
The CRA lists a general rate of 15%, and 9% for a CCPC on up to $500,000 of active business income.
What is the Ontario small business rate?
The CRA says the Ontario lower rate falls from 3.2% to 2.2% on 1 July 2026. The general Ontario rate is 11.5%.
Who gets the small business rate?
A Canadian-controlled private corporation, on qualifying active business income up to the shared limit of $500,000.
Do associated companies each get $500,000?
No. Associated corporations share one $500,000 limit.
Is there more tax when you take money out?
Yes. A dividend or salary paid to you is taxed personally, on top of the corporation's tax.
- How Canadian income tax works: brackets and credits
How federal and provincial Canadian income tax stack up, what marginal and average rates mean, and how credits and deductions change your bill