Ontario Small Business Taxes: What Every Entrepreneur Needs to Know in 2025
By Unity Financial Services – Helping You Keep More of What You Earn
Running a business in Ontario comes with big dreams, big work… and yes, big tax questions. One of the most common questions we hear from entrepreneurs, consultants, freelancers, and small corporations is:
“How much corporate tax do I actually pay if my business makes under $500,000?”
Good news — the answer is simple, and even better, it’s LOWER than most people think.
⭐ The Magic Number: 12.2% Corporate Tax in Ontario
If your business is a Canadian-Controlled Private Corporation (CCPC) and earns less than $500,000 in active business income, you qualify for the Small Business Tax Rate.
Here’s the exact breakdown:
- 9% Federal Tax
- 3.2% Ontario Tax
➡️ Total = 12.2% Corporate Tax
That’s one of the lowest business tax rates in North America.
🚀 Why This Matters for Your Business
A low corporate tax rate gives small businesses a massive advantage:
1. More Cash Flow to Grow
Whether you’re hiring, expanding, investing in equipment, or scaling operations — lower taxes mean more money stays in your business.
2. Perfect for New Entrepreneurs
If you started your corporation recently, the 12.2% rate makes it easier to build reserves and reinvest confidently.
3. A Key Strategy for Wealth Building
Smart business owners often combine the low corporate tax with:
✔️ Salary vs. dividend planning
✔️ Holding companies
✔️ Corporate investing
✔️ RRSP + FHSA contribution planning
A tax-efficient structure can save tens of thousands every year.
📊 Real Examples: How Much Tax Will You Pay?
Business Profit: $100,000
→ Corporate tax = $12,200
Business Profit: $250,000
→ Corporate tax = $30,500
Business Profit: $500,000
→ Corporate tax (max small business limit) = $61,000
Anything above $500,000 gets taxed at the higher general rate (~26.5%), so staying within the small business threshold is a big financial advantage.
⚠️ Not All Income Qualifies
Remember: the 12.2% rate applies only to:
- Active business income
It does not apply to:
- Rental income
- Investment income
- Capital gains (different rules)
- Loan interest income
- Foreign income in most cases
If your corporation earns passive income over $50,000, your small business limit may also start shrinking.
🧠 Final Word: Don’t Leave Money on the Table
Most business owners overpay taxes simply because they don’t have the right strategy.
At Unity Financial Services, we help Ontario businesses:
✔️ Structure their year for tax savings
✔️ Avoid CRA penalties
✔️ Optimize salary/dividend mix
✔️ Plan RRSP, FHSA, and corporate investments
✔️ File corporate taxes stress-free
Whether your business makes $50,000 or $500,000 — smart tax planning puts more money back into your pocket.
Need corporate tax planning or year-end filing?
Send us a message today and we’ll guide you step-by-step.
Unity Financial Services
Smart. Simple. Strategic.