Corporate Investment-Income Comparator
Interest vs dividends vs capital gains inside the corporation: after-tax growth, AAII generated, RDTOH and CDA created.
Inside a CCPC, what kind of income your portfolio earns matters as much as how much. Interest is taxed at ~50% and counts fully toward AAII. Capital gains are taxed on half, count half toward AAII, and credit the other half to the CDA — extractable tax-free. Same return, radically different destinations.
The corporate investment tax system looks punitive until you see the machinery: much of the ~50% rate is refundable (RDTOHRDTOH — Refundable Dividend Tax On Hand
Refundable tax a corporation prepays on investment income (tracked as ERDTOH/NERDTOH), returned at $38.33 per $100 of taxable dividends paid to shareholders. Full glossary →) when you eventually pay dividends, and the untaxed half of every capital gain builds the CDACDA — Capital Dividend Account
A notional account tracking tax-free surpluses (the untaxed half of capital gains, life-insurance proceeds above ACB). Balances can be paid to shareholders completely tax-free via a T2054 election. Full glossary →. A portfolio designed around those flows keeps more, grinds less, and exits cheaper.
This comparator applies the real drag rates to your mix, tracks the AAIIAAII — Adjusted Aggregate Investment Income
Most passive investment income earned across the corporate group in a year. Above $50,000, each extra dollar removes $5 of the small-business deduction limit. Full glossary → it generates each year (feeding the grind calculator), and totals the RDTOHRDTOH — Refundable Dividend Tax On Hand
Refundable tax a corporation prepays on investment income (tracked as ERDTOH/NERDTOH), returned at $38.33 per $100 of taxable dividends paid to shareholders. Full glossary → and CDACDA — Capital Dividend Account
A notional account tracking tax-free surpluses (the untaxed half of capital gains, life-insurance proceeds above ACB). Balances can be paid to shareholders completely tax-free via a T2054 election. Full glossary → balances your mix builds. It is also the benchmark engine the book demands: any advanced strategy — COLICOLI — Corporately-Owned Life Insurance
Permanent life insurance owned and paid for by the corporation. Exempt growth avoids AAII; the death benefit less ACB credits the CDA. Full glossary →, IFAIFA — Immediate Financing Arrangement
Borrowing against a permanent policy’s cash value right after funding it, redeploying the capital in the business. Interest deductibility rides on paragraph 20(1)(c) — documentation is everything. Full glossary →, IRPIRP — Insured Retirement Plan
Using a policy’s cash value as collateral for retirement-income loans. Judge it on True Net Cost, never on the tax-free label. Full glossary → — must beat this simple portfolio on your numbers, after every fee and after tax.
Most passive investment income earned across the corporate group in a year. Above $50,000, each extra dollar removes $5 of the small-business deduction limit. Full glossary → management strategy there is.
Refundable tax a corporation prepays on investment income (tracked as ERDTOH/NERDTOH), returned at $38.33 per $100 of taxable dividends paid to shareholders. Full glossary → as free money. The refund only arrives when taxable dividends are paid to you personally — which triggers personal tax. RDTOH softens double taxation; it does not eliminate the second layer.
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Questions to ask your advisor
What are my current RDTOH (ERDTOH/NERDTOH) and CDA balances, and what would release them?
What is my portfolio’s realized-income mix — and could turnover be lowered without hurting the strategy?
At what portfolio size does my AAII cross $50,000, and what changes before then?
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Educational illustration, not advice. This tool is provided for educational purposes only and does not constitute financial, tax, legal, accounting, or insurance advice. Results are estimates, not promises — hypothetical illustrations are projections only. Figures use Ontario rates as of the date stamped above; rates and limits change. Confirm current figures and your specific situation with a CPA, tax lawyer, and licensed insurance advisor before acting.