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Incorporation tax savings calculator

Reviewed by EverStone CPA · July 2026

Quick answer: See roughly how much tax you could defer by leaving profit in a corporation instead of taking it all personally. Built for BC small businesses and contractors. A free tool from EverStone CPA, Abbotsford.

Your annual business profit (before tax) How much do you need to take personally each year? Your personal marginal tax rate (BC)

$8,600

estimated tax deferred by incorporating, this year

Simplified estimate using an ~11% BC small-business corporate rate on retained profit vs your personal marginal rate. It shows tax deferral, not permanent savings — tax applies later when you withdraw the funds. Real outcomes depend on CPP, dividends, RRSP room and your full situation. Not tax advice — book a free consult for your real numbers.

What this calculator answers

How much tax do I defer by leaving profit inside the corporation instead of taking it all out?

A sole proprietor deciding whether to incorporate, or an owner deciding how much to draw this year. It measures deferral, not saving. Tax on that money is paid later, when it comes out as salary or dividends.

A worked example

These are the numbers already in the calculator above, so you can follow the arithmetic against the result it is showing.

The values the page loads with: $120,000 of profit, $70,000 drawn personally
Step	Figure
Profit	$120,000
Drawn personally	$70,000
Left in the company	$50,000
Rate difference	Personal marginal rate less the 11% small business rate
At a 40% personal rate	$50,000 × (40% − 11%) = $14,500 deferred this year

What it assumes, and where it stops

Every estimate rests on assumptions. These are the ones that would change your number most.

Where this estimate stops being reliable
Assumption	What it means for your number
Deferral, not permanent saving	The gap closes when the money is paid out. The benefit is the use of the cash in the meantime, and any rate difference at the time of payout.
An 11% combined small business rate	That is the BC federal-plus-provincial small business rate. Other provinces differ.
It ignores the cost of the corporation	Incorporation adds a T2, financial statements, a separate bank account and annual filings. Below a certain profit those costs outweigh the deferral.
It ignores payroll cost on the draw	Taking the draw as salary triggers CPP on both sides, and possibly employer health tax. Taking it as dividends does not, but changes RRSP room.

General information, not advice. Have a CPA confirm it for your situation

How incorporating saves tax

An incorporation estimator measures deferral rather than saving: profit left inside the corporation is taxed at the small business rate now and at your personal rate whenever it is drawn out, so the benefit is timing — and it disappears almost entirely for an owner who needs every dollar personally — The saving is deferral; the second tax layer is only postponed.

Should you incorporate? What the numbers really show

Incorporating lets you leave profit inside your company taxed at the low small-business rate (around 9–12% combined, versus personal rates that climb past 40%). That deferral is the main tax benefit — you only pay personal tax on what you actually take out, so you can smooth income across good and lean years.

But incorporation adds a T2 return, bookkeeping and filing costs, so below a certain income it isn’t worth it. The estimate above shows the potential deferral at a marginal rate you choose; the right answer depends on how much you need to live on, your province, and your plans. It’s a starting point for a conversation, not a decision on its own.

This calculator gives a general estimate for information only — not tax advice specific to your situation. Rates and rules change, and your result depends on details it can’t capture. We confirm the numbers for your circumstances in a free consult.

Questions

Good to know

Does incorporating actually save me tax?+

It mainly defers tax. Profit you leave in the company is taxed at roughly 11% in BC instead of your personal rate (up to 53.5%). You pay personal tax later when you withdraw it, so the benefit is holding onto more money now to reinvest or smooth your income. If you spend everything the business earns, the tax benefit is small and incorporation is more about liability protection.

At what income should I incorporate?+

There is no magic number, but the benefit grows once you are consistently leaving profit in the business beyond what you need to live on. Many owners find it worthwhile once profit is comfortably into six figures. We will look at your real numbers in a free consult.

What does incorporating cost?+

There is a one-time incorporation cost plus ongoing annual work: a T2 corporate return, bookkeeping, and a way to pay yourself (salary or dividends). We quote all of it as a fixed fee so you can weigh it against the tax benefit.

How should I read the savings estimate?+

Read it as a directional comparison, not a promise. The estimator compares tax on the assumptions you enter under a sole proprietorship against a corporation, which means it reflects your inputs rather than your finished return. Small changes to how much you draw personally can move the result a long way, so try two or three draw levels before drawing conclusions.

What does this estimator not account for?+

It does not account for the annual cost of running a corporation, personal services business risk if you effectively work for one client, associated-company rules, provincial differences beyond the rates used, or the CPP and RRSP room you give up by taking dividends instead of salary. Those are often the factors that decide whether incorporating is worth it.

Does the answer change if my spouse is a shareholder?+

It can, but far less freely than owners expect. Tax on split income rules restrict paying dividends to a family member who is not genuinely involved in the business, and the exceptions depend on hours worked, age, and ownership. Treat any split-income planning as something to confirm before shares are issued, because share structure is awkward to unwind afterwards.

What should I do before acting on the result?+

Have the assumptions checked against your actual numbers before you incorporate. The estimate is only as good as the income, expense and draw figures you typed in, and incorporation brings filing obligations that continue every year whether or not the company is profitable. Book a free consult and you will get a fixed quote in writing after the situation is reviewed.

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Run your own numbers first

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Sources

The rates and thresholds behind this page. Rates change — check the source before relying on a figure.

General information, not advice. Have a CPA confirm it for your situation

Want the exact numbers for your situation?

These tools are a starting point. Book a free consult and we’ll run your real figures — and give you a fixed quote to handle it all.

Book a Free Consult Email us your question

If the numbers say yes, the next question is timing — when to incorporate covers the triggers and the sequence to follow.