LAB 01 — Business Owners

Passive income & small business deduction calculator

Is your company's investment income eating your small business rate? Drag the sliders — computed in your browser, nothing you enter leaves this page.

ON — Ontario rates used as the example; the mechanics apply Canada-wide (Quebec’s system differs in some details).

Corporate passive investments

Taxable annual yield

Assumes: Ontario CCPC with active business income ≥ $500,000 (full SBD otherwise available); combined small business rate 12.2%, general rate 26.5%. 2025 parameters; educational estimate, not advice.

Adjusted aggregate investment income (AAII)

Small business limit remaining

$500K limit

Extra corporate tax, every year

Key numbers — passive income & the SBD (2025/26)

Threshold: $50,000 of AAII per year before the grind starts (ITA s.125(5.1))
Grind: $5 of business limit lost per $1 over — the $500K limit is gone at $150,000 AAII
Cost of a fully ground limit (ON): $500,000 × (26.5% − 12.2%) = $71,500/yr
Growth inside exempt life insurance contracts does not count as AAII

What is the passive income grind?

A CCPC's small business deduction shrinks by $5 for every $1 of investment income above $50,000 a year. A corporation with $150,000 of passive income loses the low rate entirely — its active profits are taxed at 26.5% instead of 12.2% in Ontario.

Where to go from here: the full guide to passive income and the small business deduction, the corporate-owned insurance container, or LAB 03 to test the alternative against your portfolio assumptions.

Book a Tax Diagnostic

Thirty minutes. Your numbers. No products pitched.

The first conversation is free — your situation, our method, and whether we fit. Complex files quote a planning fee up front: you'll know before we start.

Book a Tax Diagnostic Not ready? Run your numbers first →

// the only variable in this plan that gets more expensive every year is your age