Tax · Corporate
Small business deduction grind calculator.
Your CCPC's $500,000 small-business tax rate limit isn't always $500,000. It's reduced on TWO separate straight-line tests — prior-year taxable capital and prior-year passive investment income — and whichever cuts deeper is the one that applies.
The limit falls in a straight line from $500,000 to $0 as taxable capital employed in Canada rises from $10M to $15M, AND separately as combined passive investment income rises from $50,000 to $150,000. Whichever test produces the smaller limit wins.
Inputs
Your reduced business limit
Enter your figures and press Calculate.
Two separate grinds, not one
CRA runs two independent tests on a CCPC's (and its associated corporations') PRIOR tax year, and applies whichever produces the bigger cut to the $500,000 business limit:
Taxable capital test: the business limit falls in a straight line from the full $500,000 at $10 million of taxable capital employed in Canada to nil at $15 million — a loss of $0.10 of business limit for every $1 of taxable capital above $10M.
Passive investment income test: the business limit falls in a straight line from the full $500,000 at $50,000 of adjusted aggregate investment income (AAII) to nil at $150,000 — a loss of $5 of business limit for every $1 of AAII above $50,000. This is the newer of the two grinds, added by the 2018 federal budget for tax years starting after 2018, aimed at CCPCs building up large passive investment portfolios inside the company.
Why the rate matters
Active business income inside your reduced business limit is taxed at the federal 9% net small-business rate. Anything above it — up to your full active business income — is taxed at the federal 15% net general rate. Provincial/territorial corporate tax is separate and stacks on top of both; this tool is federal-only.
Sources, read 26 September 2026: CRA T4012 — T2 Corporation Income Tax Guide, Chapter 4 (business limit reduction, both tests and their $10M/$15M and $50,000/$150,000 endpoints), CRA — Corporation tax rates (9% SBD net rate, 15% general net rate).
Frequently asked questions
Which year's taxable capital and passive income do I use?
The PRIOR tax year's figures, combined across the corporation and every corporation it's associated with — not the current year you're calculating tax for.
What if both grinds apply?
CRA applies whichever test produces the SMALLER resulting business limit (the bigger cut) — not both stacked together. This tool shows both limits and tells you which one is binding.
What counts as adjusted aggregate investment income (AAII)?
Broadly, interest, most rental income, taxable capital gains net of allowable capital losses, and other passive investment-type income — calculated on Schedule 7. It excludes income incidental to an active business and gains eligible for the lifetime capital gains exemption. This tool takes AAII as a single input; use your Schedule 7 result.
Does this include provincial small-business tax rates?
No — this models the FEDERAL business limit and federal 9%/15% rates only. Most provinces run their own small-business rate and business limit (often, but not always, also $500,000), calculated separately.
Estimate only
This models CRA's federal business-limit grind formulas as published for the current tax year. It does not model provincial/territorial corporate tax, associated-corporation Schedule 23 business-limit allocation elections, the substantive-CCPC and specified-investment-business rules, or the taxable-income-based business-limit test. Confirm your exact SBD entitlement with CRA or an accountant.