WHAT CHANGED
Starting July 1, 2026, Ontario dropped its small business corporate tax rate from 3.2% to 2.2%.
This lower rate applies to the first $500,000 of active business income earned by an eligible Canadian-controlled private corporation (CCPC). Add in the federal small business rate, and the combined tax rate on that income drops from 12.2% to 11.2%.
WHY IT MATTERS
1% point doesn't sound like much on its own. But if your corporation earns close to that $500,000 mark each year, it adds up. We're talking thousands of dollars in tax savings, year after year, for the life of your corporation.
That's money that stays in your business instead of going to taxes. You can put it toward payroll, equipment, paying down debt, or just building a bigger cushion.
THE SLIGHTLY CONFUSING PART
The new rate doesn't apply cleanly to everyone right away. It depends on your fiscal year-end.
If your corporation's fiscal year runs January to December, you'll pay a blended rate for 2026. Part of the year is taxed at the old 3.2% rate, and part is taxed at the new 2.2% rate, split based on the number of days before and after July 1st.
That means the rate on your 2026 financial statements won't be a clean 2.2%. It'll be somewhere in between, and the exact number depends on your specific year-end date. If your year-end falls somewhere other than December 31, your math will look different again.
Not to worry, our team takes care of that automatically.
WHAT TO DO NEXT
Nothing. You don't need to file anything or apply for this. If your corporation already qualifies for the small business rate, the savings happen automatically.
But if you want to know exactly what this means in dollars for your business this year, reach out to the tax team member on your file and we’re happy to chat.
Power to you,
Think Team 🙏
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