CCPC Passive Income Trap Calculator Ontario 2026 | Insight CPA

Free Canadian Tax Tool · Insight CPA

CCPC Passive Income Trap Calculator Ontario 2026 | Insight CPA

See how much of your small business deduction is at risk under the s.125(5.1) passive-income grind. Enter your Adjusted Aggregate Investment Income (AAII) and active business income to get the ground-down SBD, extra corporate tax, and specific restructuring next steps.

Calculator

How to use this tool

  1. 1
    Enter your AAII. Add interest, taxable capital gains, dividends from portfolio investments, and rent from non-active operations from your prior tax year.
  2. 2
    Enter your active business income. Net operating profit of the CCPC before corporate tax.
  3. 3
    Read the grind and the extra tax. The tool shows how much of your SBD is ground down, the extra corporate tax you pay, and a plain-English restructuring path.

Frequently asked questions

What is the CCPC passive-income trap?
Since 2019, ITA s.125(5.1) reduces the small business deduction by $5 for every $1 of Adjusted Aggregate Investment Income (AAII) above $50,000. Once AAII hits $150,000, the SBD is fully ground out and every dollar of active business income is taxed at the general 26.5% Ontario combined rate.
What counts as AAII?
Adjusted Aggregate Investment Income = aggregate investment income (interest, taxable capital gains, portfolio dividends, rent from non-active operations) minus a few adjustments. Dividends from connected corporations are excluded. Capital gains realized on active business assets are also excluded.
How do I avoid the grind?
Common strategies: split the corporation into Opco (active business) and Holdco (investments) via s.85 rollover; contribute to an Individual Pension Plan; use exempt permanent life insurance where policy-inside growth is not AAII; time capital gain / loss realisations to smooth AAII across years.

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