Ontario corporate tax rates 2026: small business and general

Ontario corporate tax rate 2026: the short answer

For a Canadian-controlled private corporation (CCPC) earning active business income inside the business limit, the 2026 federal rate is 9%. The Ontario small business rate is 3.2% until June 30, 2026 and 2.2% from July 1, 2026. Combined, that is 12.2% before the change and 11.2% after it.

Income above the business limit is taxed at the general rates: 15% federal (after the general tax reduction) and 11.5% Ontario, for a combined 26.5%. The business limit is $500,000 for a corporation that is not associated with another.

A fiscal year that straddles July 1, 2026 does not use one rate. The Ontario rate is applied by days. Examples are below, and the rates will change if a budget or notice changes them, so check the CRA rates page for the year in question.

Small business tax rate in Ontario and the $500,000 business limit

The small business deduction is what produces the low rates. It generally applies to a CCPC’s active business income up to the business limit. The federal net rate on that income is 9%, and Ontario applies its lower rate to the same income. The CRA’s table shows an Ontario business limit of $500,000 as well.

Several things can reduce or remove the limit. If your corporation is associated with others, the limit is shared among them and allocated on Schedule 23. If a tax year is shorter than 51 weeks, the limit is prorated by the number of days divided by 365. Large CCPCs lose it gradually as taxable capital employed in Canada rises from $10 million toward $50 million.

The lower rate is not available to every corporation. A corporation that is not a CCPC does not qualify, and income that is not active business income is not eligible, which is why the label “small business” is shorthand rather than a size test.

The July 1, 2026 Ontario rate change and fiscal years that span it

The 2026 Ontario budget announced that the lower rate falls from 3.2% to 2.2% effective July 1, 2026, and the CRA’s rates table now shows 2.2%. The higher Ontario rate of 11.5% and the $500,000 business limit are unchanged, and the federal 9% rate is unchanged.

When a rate changes during a tax year, the CRA says to base the calculation on the number of days each rate is in effect. For a calendar 2026 year, 181 days (January 1 to June 30) fall under 3.2% and 184 days (July 1 to December 31) fall under 2.2%. The blended Ontario rate is about 2.70%, so the combined rate on small business income is about 11.70%.

Other year-ends work the same way. A year ending June 30, 2026 is entirely at 3.2%. A year ending September 30, 2026 has 273 days at 3.2% and 92 days at 2.2%, a blended Ontario rate of about 2.95%. A year that begins on or after July 1, 2026 is entirely at 2.2%. This is the arithmetic only: the T2 and Ontario schedules do the actual calculation, so confirm the result with your accountant.

If your corporation is bringing a year-end forward or back, the days in each period are the point to watch.

Worked example: calendar 2026, $600,000 of active business income

This is an illustration with round numbers, not a forecast. Assume a CCPC with a calendar year-end, no associated corporations, no passive income problem and $600,000 of taxable income, all from an active business.

Federal: $500,000 at 9% is $45,000, and the remaining $100,000 at 15% is $15,000, for $60,000.

Ontario: $500,000 at the blended 2.70% (more precisely 2.6959%) is about $13,479, and $100,000 at 11.5% is $11,500, for about $24,979.

Total: about $84,979, or roughly 14.2% of the $600,000. The same corporation with $400,000 of income would pay $36,000 federal plus about $10,784 Ontario, about $46,784 in all. The example ignores credits, corporate minimum tax and instalment interest, which can all change the real figure.

Passive income, investment income and the business limit

A CCPC that holds investments can lose the small business rate on its operating income. The business limit is reduced when the corporation and any associated corporations earn between $50,000 and $150,000 of passive investment income, measured as adjusted aggregate investment income on Schedule 7. Above $150,000, the business limit is nil.

In practice, a profitable corporation that parks surplus cash in interest-bearing or dividend-paying investments can see its operating profit taxed at the general rates, at a combined 26.5%, instead of about 11.2% to 12.2%. This is sometimes called the passive income grind. The CRA page gives the range and the endpoint. Ask your accountant to model the reduction between those figures for your numbers.

Investment income earned in the corporation is not taxed at the small business rate. The CRA’s guide says the general tax reduction does not apply to investment income subject to the refundable tax provisions, and part of the Part I tax on that income may be refundable. The investment income rates and the refund mechanics are not stated here, so ask your accountant for the current figures and how a dividend would affect them.

What to bring to your accountant

Rates are only one input. The amount you actually pay depends on which income is eligible, how many corporations are associated, the year-end and how much passive income you earn. Bring the corporation’s year-end, a list of any related corporations, and a summary of investment income and balances.

If your income is near $500,000, or your investments produce more than about $50,000 a year, ask for a projection before year-end. Timing of income, salary or dividends, and investment holdings can all be reviewed while there is still time to act.