Small Business Deduction Calculator Canada 2026 | Insight CPA

Free Canadian Tax Tool · Insight CPA

Small Business Deduction Calculator Canada 2026 | Insight CPA

Calculate your effective small business deduction after the taxable-capital and passive-income grinds under ITA s.125. Enter your ABI, taxable capital, AAII, and province to see your remaining SBD limit, total corporate tax, and specific restructuring steps.

Calculator

How to use this tool

  1. 1
    Enter your active business income (ABI). Net operating profit before corporate tax, excluding investment income and specified investment business income.
  2. 2
    Enter taxable capital of the associated group. Roughly net corporate equity + long-term debt + retained earnings + share capital, calculated per Schedule 33.
  3. 3
    Enter aggregate investment income (AAII). Passive investment income of the associated group in the prior year.
  4. 4
    Choose the province. Sets the combined SBD and general rates.
  5. 5
    Read your effective SBD limit and next steps. The tool shows how much SBD you keep, the extra tax if any, and what to do about it.

Frequently asked questions

What is the small business deduction (SBD)?
The SBD under ITA s.125(1) reduces the federal corporate tax rate on the first $500K of active business income earned by a Canadian-Controlled Private Corporation (CCPC) from 15% to 9%. Combined with provincial small-business rates (Ontario 3.2%, BC 2%, AB 2%), effective rates drop from about 26.5% to about 12.2% in Ontario.
What is the taxable-capital grind?
Under s.181, when a CCPC (and its associated group) has taxable capital over $10M, the SBD grinds linearly to zero by $50M. Taxable capital is roughly net corporate equity plus long-term debt, calculated on Schedule 33 of the T2 return.
How do associated corporations share the SBD?
Under s.125(5), associated corporations must share the $500K business limit among themselves via a signed sharing agreement (T2 Schedule 23). Without an agreement, the CRA allocates zero to each, so the agreement is critical.

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