Salary vs Dividends 2026: Owner Compensation Strategies for Ontario
Salary vs Dividends 2026: Owner Compensation Strategies for Ontario
The $50,000 Decision: Every year, Ontario business owners ask: Should I pay myself a salary or dividends? In 2026, this decision has become more nuanced than ever. Consult with a corporate tax specialist to optimize your strategy.
The Case for Salary in 2026
Salary generates CPP contribution room (max $7,068 total for 2026) and RRSP room at 18% of earned income. It also provides income predictability for mortgage qualification and disability insurance. Our accounting team can help you calculate the optimal salary level.
The Case for Dividends in 2026
Dividends offer lower marginal tax rates (7.56% to 33.51% vs 15% to 53.53% for salary), no CPP premiums, and administrative simplicity. However, they don’t generate RRSP room.
The Hybrid Strategy
Most successful owners use a hybrid approach: salary to maximize CPP (~$65,500), additional salary for RRSP room ($20-40k), and dividends for excess cash needs. Contact our CPA team for personalized advice.
2026 Specific Considerations
CPP enhancement Phase 2 continues, Ontario corporate tax rates remain stable (12.2% small business rate), and integration has tightened between salary and dividend taxation.
Contact Insight Accounting CPA at (905) 270-1873 or book a consultation for personalized compensation strategy advice.
Frequently Asked Questions
Is it better to pay yourself salary or dividends in 2026?
The optimal choice depends on your income level, retirement goals, and need for RRSP room. Most business owners benefit from a hybrid approach.
How much salary should I pay myself to maximize CPP?
For 2026, earning approximately $65,500 maximizes your CPP contributions while maintaining tax efficiency.
Do dividends affect my ability to get a mortgage?
Some lenders prefer salary income for mortgage qualification. If home buying is a priority, consider a higher salary component.