The small business deduction lowers the federal corporate tax rate to 9% on the first $500,000 of active business income earned by a Canadian-controlled private corporation.
The SBD is the single most valuable tax break for a small Canadian company. It cuts the federal rate from 15% to 9% on the first $500,000 of active business income for a CCPC, and most provinces add a low provincial small business rate, producing a combined rate of roughly 9% to 12.2%.
The $500,000 limit is shared among associated corporations and is ground down if the corporation earns more than $50,000 of passive investment income in a year (eliminated at $150,000). Protecting access to the SBD, by managing passive income and association, is a core planning objective.
A CCPC earning $500,000 of active business income pays roughly $60,000 combined at the small business rate, versus a general-rate figure that would be tens of thousands higher, a direct saving from the SBD.
Our certified accounting firm handles this for businesses and individuals across Canada, at fixed fees with no surprises.
Book a Free 15-Minute CallCommon questions regarding our compliance workflows and service guarantees.