Small business tax · Salary
Owner-manager salary, RRSP room and CPP.
Pay yourself $X from the corporation: see the RRSP room it creates and the CPP it costs.
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Salary, RRSP room and CPP
RRSP room for a year is 18% of the previous year's earned income, up to the annual dollar limit: $33,810 for 2026 and $35,390 for 2027. CRA's earned income list includes employment income and net business income and does not list dividends, so a salary from your corporation creates room and a dividend does not. A salary of about $187,833 earned in 2025 is needed for the full 2026 room, and about $196,611 earned in 2026 for the full 2027 room.
For 2026, CPP is 5.95% of earnings between $3,500 and $74,600 from the employee and the same from the employer, up to $4,230.45 each, and CPP2 is 4% of earnings between $74,600 and $85,000, up to $416 each. Your corporation deducts its half; you deduct the enhanced CPP and CPP2 and claim a credit for the base part.
Worked example. A $100,000 salary in 2025 creates $18,000 of 2026 RRSP room; the 2026 CPP on a $100,000 salary is $4,646.45 each for you and the corporation.
What it leaves out
Pension adjustments from a registered plan, unused room carried forward, EI, and the personal tax on the salary (see the salary versus dividend calculator for that).
Frequently asked questions
How much salary do I need to maximize RRSP room?
About $187,833 of earned income in 2025 for the $33,810 limit for 2026, and about $196,611 in 2026 for the $35,390 limit for 2027, because room is 18% of earned income.
Do dividends create RRSP room?
No. CRA's earned income list for the RRSP limit covers employment and net business income and similar items, not dividends.
How much CPP do I pay on a salary from my own corporation?
For 2026, 5.95% of salary between $3,500 and $74,600 as the employee and the same as the employer, plus 4% of salary between $74,600 and $85,000 for CPP2.
What salary maximizes CPP?
A 2026 salary of $74,600 reaches the maximum CPP contribution and $85,000 reaches the CPP2 maximum.
Sources
Checked (retrieved from the publisher)
- CRA: CPP contribution rates, maximums and exemptions
- CRA: Second additional CPP (CPP2) contribution rates and maximums
- CRA: Line 30800, CPP or QPP contributions through employment
- CRA: MP, DB, RRSP, DPSP, ALDA, TFSA limits, YMPE and the YAMPE
- CRA T4040 RRSPs and other registered plans for retirement (earned income)
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Scope
General estimate for the 2025 and 2026 years. Your actual RRSP room is on your CRA My Account notice of assessment. Not tax advice.