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Salary vs Dividends
Incorporated? See how much you keep by paying yourself a salary versus dividends this year, with your province's 2026 tax, CPP, and RRSP room worked out for you.
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Salary$101,848in your pocket
Dividends$110,872in your pocket
| Salary | Dividends | |
|---|---|---|
| Corporate tax | $0 | $18,300 |
| Personal tax | $38,859 | $20,828 |
| CPP contributions | $9,293 | — |
| RRSP room earned | $26,164 | — |
Dividends leave $9,024 more in your pocket
Estimate for 2026, assuming this is your only income and profit within the small business limit. Not tax advice.
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Two ways to pay yourself
Salary vs dividends
As an incorporated owner you can pay yourself a salary, take dividends, or blend the two. They're taxed and reported very differently.
Salary
A paycheque from your corporation
Reported on a T4 slip
- Deductible expense that lowers your corporate tax
- Requires payroll: CPP (both halves) and income tax withheld
- Builds RRSP room at 18% of the salary you pay yourself
- Counts as earned income for CPP, mortgages, and childcare
Dividends
A share of after-tax profit
Reported on a T5 slip
- Paid from profit your corporation has already taxed
- No CPP contributions and no payroll to run
- No RRSP room and no earned income created
- Grossed up with a dividend tax credit to avoid double tax
More cash today isn't the whole story. Dividends usually leave a bit more in your pocket now largely because you skip CPP, but salary builds CPP retirement benefits and RRSP room and gives you earned income that lenders rely on. The right mix depends on your goals, and a CPA can model it with you.
How the CRA sees each option
Salary and dividends are reported on different slips and flow through your corporation's T2 return differently. The calculator uses 2026 federal and provincial rates.
SalaryT4 slip · deductible to the corp · CPP applies
DividendsT5 slip · paid from after-tax profit · no CPP
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FAQ
Salary vs dividends, explained
Is it better to take salary or dividends in Canada?
It depends on your goals. For pure after-tax cash today, dividends often edge out salary because you skip CPP contributions. But salary builds CPP retirement benefits and RRSP room and counts as earned income for things like a mortgage. Many incorporated owners take a mix. The calculator shows the cash difference for your province and profit so you can see the trade-off, then a CPA can help you choose the split.
Do dividends count for RRSP room?
No. Only salary and other earned income create RRSP contribution room, at 18% of earned income up to the annual dollar limit. Dividends generate no RRSP room. That's one reason many owners keep paying themselves at least some salary even when dividends look better on paper.
Do I pay CPP on dividends?
No. Dividends are not subject to CPP. Salary is: your corporation pays the employer half and you pay the employee half, together about 11.9% of pensionable earnings up to the annual maximum in 2026, plus CPP2 on earnings above the first ceiling. Skipping CPP is a big part of why dividends can leave more cash in hand, but it also means you're not building a CPP pension.
What is the dividend tax credit?
Because your corporation already paid tax on its profit before paying a dividend, the dividend is grossed up on your personal return and you receive a dividend tax credit to offset the corporate tax already paid. This system, called integration, is designed to avoid taxing the same income twice. Non-eligible dividends, paid from small-business-rate income, carry a 15% gross-up and a smaller credit than eligible dividends.
Should I pay myself a mix of salary and dividends?
Often, yes. A common approach is enough salary to build RRSP room or CPP and cover your personal cash needs, with the rest paid as dividends. The best mix depends on your income, retirement plans, and whether you need earned income for a mortgage or childcare deductions. This calculator compares the two extremes, all salary versus all dividends, so use it as a starting point and confirm the split with a CPA.
How accurate is this calculator, and is it tax advice?
It's a good-faith estimate using 2026 federal and provincial rates for Ontario, British Columbia, Alberta, and Quebec. It assumes the amount is your only income and your active business profit is within the small business limit, so dividends are non-eligible. It is not tax advice. Your situation may involve other income, the small-business-deduction grind, eligible dividends, or provincial nuances. Confirm your plan with a CPA before acting. ReInvestWealth is built by CPAs and can help.
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