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Dividend vs Salary Calculator

2025
Comparison Details
$
$

Gross amount before personal tax

Salary saves you

$2,193.14

in total tax (corporate + personal combined)

Salary Route
Corporate Income$200,000.00
Salary Deduction-$100,000.00
Corp Taxable Income$100,000.00
Corporate Tax$12,200.00
Retained in Corp$87,800.00
Gross Salary$100,000.00
Federal Tax-$14,392.73
Provincial Tax-$6,377.83
CPP Contribution-$4,646.45
Net Personal Cash$74,583.00
Total Tax Paid$37,617.00
RRSP Room Generated$18,000.00
CPP Benefits BuiltYes
Dividend Route
Corporate Income$200,000.00
No Salary Deduction-
Corp Taxable Income$200,000.00
Corporate Tax$24,400.00
After-Tax Profits$175,600.00
Dividend Paid$100,000.00
Gross-Up (15%)$15,000.00
Federal Tax$17,467.73
Federal DTC-$10,384.62
Provincial Tax$8,327.03
Net Personal Cash$84,589.86
Total Tax Paid$39,810.14
RRSP Room Generated$0.00
CPP Benefits BuiltNo
Retained in Corp$75,600.00
More Information
Frequently Asked Questions
Integration is the principle that the total tax paid on corporate income should be approximately equal regardless of whether it flows to the individual as salary or as dividends. Under perfect integration, paying yourself a salary (which is deductible by the corporation) and paying personal tax on that salary should result in the same total tax as having the corporation pay tax and then distributing the after-tax profits as dividends. In practice, perfect integration is rarely achieved, creating planning opportunities.
Eligible dividends are paid from corporate income taxed at the general rate (not the SBD rate). They receive a 38% gross-up and a higher dividend tax credit. Non-eligible dividends are paid from income taxed at the small business rate. They receive a 15% gross-up and a lower dividend tax credit. The distinction matters because the gross-up and credit mechanism is designed to integrate corporate and personal tax levels. Generally, income from the SBD pool generates non-eligible dividends.
RRSP contribution room is generated by earned income, which includes employment income (salary) but NOT dividend income. The RRSP deduction limit is 18% of prior year earned income, up to the annual maximum ($32,490 for 2025). If you pay yourself entirely in dividends, you generate no RRSP room. This is a significant consideration because RRSP contributions provide a tax deduction and tax-deferred growth. Missing out on RRSP room is an opportunity cost of the dividend strategy.
Salary is subject to CPP contributions (both employee and employer portions). While this increases the immediate cost, CPP contributions build retirement benefits. If you pay yourself dividends, you do not contribute to CPP (dividends are not pensionable earnings), which means lower costs now but no CPP retirement benefits. You can offset this by investing the CPP savings privately. The optimal choice depends on your retirement planning strategy and the rate of return on private investments vs CPP benefits.
Salary tends to be better when: you want to maximize RRSP contribution room; you want to build CPP retirement benefits; your corporation is above the SBD limit ($500K); you have childcare expenses that require earned income; or you want to create EI insurable hours. Salary also reduces corporate income, potentially keeping it within the SBD limit.
Dividends tend to be better when: you do not need RRSP room (already have sufficient savings); you do not need CPP benefits; your personal tax rate on dividends is lower than on salary; you want to avoid CPP contributions; or you have other sources of earned income that already generate RRSP room and CPP contributions. The dividend tax credit can make dividends more tax-efficient in certain income ranges.
Yes, and this is often the optimal strategy. A common approach is to pay enough salary to maximize your RRSP contribution room (18% of salary up to the RRSP limit), and then pay the remainder as dividends. This gives you the best of both worlds: RRSP room, some CPP benefits, and the tax efficiency of dividends on the remaining amount. The exact split depends on your specific circumstances and should be reviewed annually with a tax advisor.

CRA-Aligned: Uses 2025 corporate SBD rates, personal tax brackets, CPP rates, and dividend gross-up/tax credit rates. This simplified comparison assumes all corporate income qualifies for SBD and dividends are non-eligible. Consult a tax professional for your specific situation.

Understanding Dividends vs Salary in Canada

How to choose the best way to pay yourself from your corporation

What is the main difference between salary and dividends?

Salary is a deductible expense for the corporation, reducing its taxable income. You pay personal income tax, CPP, and EI on salary. Dividends are paid from after-tax corporate profits and are not deductible. You pay personal tax on dividends but at a lower rate due to the dividend tax credit. Neither approach is universally better — it depends on your situation.

How does salary create RRSP room?

Only earned income (including salary) creates RRSP contribution room. For 2025, you earn 18% of your salary as RRSP room, up to a maximum of $32,490. If you pay yourself $100,000 in salary, you get $18,000 in new RRSP room. Dividends do not create any RRSP room, which could limit your retirement savings options.

What about CPP contributions?

Salary triggers mandatory CPP contributions. As an owner-employee, the corporation pays the employer half and you pay the employee half. On a $100,000 salary, total CPP is about $8,068. While this costs more upfront, CPP provides retirement income later. Dividends do not require CPP contributions, so you miss out on pension benefits but save on the premiums.

Which option results in lower total tax?

In most provinces, the combined corporate and personal tax on dividends is roughly similar to the personal tax on salary — this is called tax integration. However, integration is not perfect in every province and every income level. In some cases, dividends result in slightly less total tax; in others, salary does. The difference is usually small compared to other factors.

How does income splitting work with dividends?

You can pay dividends to adult family members who are shareholders, potentially splitting income among lower-bracket earners. However, the Tax on Split Income (TOSI) rules limit this strategy. Generally, adult family members must be actively involved in the business to receive dividends without triggering the TOSI penalty, which taxes the income at the top marginal rate.

What about childcare and other personal deductions?

Salary counts as earned income, which is needed for claiming childcare expense deductions. If you rely on childcare while you work, paying yourself salary ensures you can deduct these costs. Dividend income does not qualify as earned income for childcare deduction purposes. This can make a meaningful difference for parents with young children.

What do most accountants recommend?

Most accountants suggest a blended approach: pay yourself enough salary to maximise your RRSP room and cover CPP, then top up with dividends if you need more personal income. This gives you the benefits of both approaches. The exact split depends on your income level, province, family situation, and retirement goals.

CRA-Aligned: Based on 2025 CRA rates and thresholds. For personal advice, speak to a qualified accountant or tax professional.

Disclaimer: This calculator provides estimates based on current CRA rates and thresholds for the 2025 tax year. It does not constitute professional tax, financial, or legal advice. Your actual liability may differ depending on your individual circumstances. Always consult a qualified accountant before making financial decisions. Read our terms

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