Which is better, salary or dividends?

Integration keeps total tax close on both routes. The real differences are RRSP/IPP room and CPP (salary) versus RDTOH release and CDA access (dividends). The answer is a mix, chosen on your numbers.

What is the CDA and why draw it first?

The Capital Dividend Account tracks tax-free corporate surpluses — the untaxed half of capital gains and life-insurance proceeds. With a T2054 election, CDA balances come out completely tax-free, so they are always the first dollar out.

Does paying myself dividends avoid CPP?

Yes — both the cost and the benefit. No contributions, but also no CPP pension accrual and no RRSP room. The calculator prices both sides.

Salary vs Dividend Mix Optimizer

Find the compensation blend for your numbers — and the smarter draw order: CDA first, then eligible dividends, then salary as needed.

★ CHAPTER BRIEF

Because of integration, salary and dividends deliver surprisingly similar total tax on the same cash — the system is built that way. What separates the routes is everything else: salary creates RRSP and IPP room and CPP credits; dividends release RDTOH and can ride out of the corporation tax-free through the CDA. The route matters less than the order and the timing.

Salary is a corporate deduction taxed once, personally. Dividends are paid from after-tax corporate income and grossed-up-then-credited personally. Run honestly, at most income levels the two routes land within a few thousand dollars of each other — the famous “$200,000 three ways” example in Chapter 3.

The optimizer sweeps every mix from all-dividends to all-salary for your profit and cash need, accounts for CPP on both sides, RRSP room created, RDTOH released and CDA drawn first, and shows which blend leaves the most family value compounding. Then it gives you the draw order the book teaches in Chapter 14: CDA → eligible (GRIP) → non-eligible → salary as needed.

★ KEY POINT

Only T4 salary creates RRSP and IPP room. An owner planning to fund an IPP at 50 needs the salary history on the record now — dividends build no pension room, ever.

⚠ COMMON MISTAKE

Optimizing a single year in isolation. Smoothing income across years — filling low brackets every year rather than spiking through top brackets occasionally — usually saves more than any salary/dividend split. Bring the multi-year picture to your CPA.

Your numbers

Corporate pre-tax profit this year

Personal cash you need (after tax)

Defaults are Maria’s from Chapter 3: $350,000 profit, $180,000 draw.

Your age45

I want to build RRSP/IPP room

Only T4 salary creates registered room — the optimizer will prefer salary in near-ties.

Include CPP (both sides)

Notional account balances (ask your CPA)

CDA balance

Comes out completely tax-free — always the first dollar.

GRIP balance

Supports eligible dividends at lower personal rates.

RDTOH balance

Released at $38.33 per $100 of taxable dividends paid.

Province

Strongest mix on your numbers

70% salary / 30% dividends$34,076 stays compounding

To put $180,000 in your hands from $350,000 of corporate profit, the strongest mix on your numbers is 70% salary / 30% dividends, leaving $34,076 compounding inside the corporation after all taxes. The all-salary and all-dividend routes differ by $3,339 in total tax — integration keeps the routes close; what separates them is what else each route buys: salary creates $33,810 of RRSP room and CPP credits (at a real contribution cost), while dividends release RDTOH. Timing and smoothing across years usually matter more than the route itself.

THE DRAW ORDER (CH 14)

Non-eligible dividends from small-business-rate earnings
Salary as needed — it alone creates RRSP and IPP room

Metric	All dividends	Best mix (70% salary)	All salary
Total tax (corp + personal)	$123,150	$126,631	$126,488
Retained in the corporation	$46,850	$34,076	$34,219
RRSP room created	$0	$33,810	$33,810
RDTOH released	$0	$0	$0

Figures as of July 2026 · Ontario basis · Educational illustration, not advice — confirm current rates with your CPA.

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Questions to ask your advisor

Ask your CPA

What are my current CDA, GRIP, and RDTOH balances — and what is our plan to release them?

Ask your CPA

Does my salary level support the RRSP/IPP room I actually intend to use?

Ask your Advisor

Given my draw, should we be smoothing income across years rather than re-optimizing the mix annually?

Continue in book order

From Chapters 1–2Where Does Your Next Dollar Land?From Chapters 2 & 5The Passive-Income Grind (AAII)From Chapter 6IPP vs RRSP

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.