Tax Guide/Corporate tax
Small business deduction
Updated November 4, 2026
The small business deduction reduces the federal rate on active business income from 15% to 9%, on up to $500,000 a year.
Who qualifies
A Canadian-controlled private corporation generally is:
- A private Canadian corporation
- Not controlled by non-residents or public corporations
Associated corporations share one $500,000 limit.
What reduces the limit
- Passive income: the limit falls by $5 for each $1 of adjusted investment income above $50,000, and is gone at $150,000.
- Large taxable capital: the limit is reduced between $10 million and $50 million.