Passive Income Tax Drag Simulator

Every dollar of passive investment income above $50,000 inside your corporation quietly erodes the small business rate on your active income. Here is exactly how much.

Reading This Tool

How To Use This Calculator

Enter your corporation's passive investment income (AAII) and its active business income.

The chart plots your effective corporate tax rate as passive income climbs from $0 to $200,000, watch the cliff between $50,000 and $150,000, where the small business deduction disappears fast. The marked dot shows exactly where your corporation sits on that curve today.

Your Inputs

Adjusted Aggregate Investment Income (AAII) $80,000

Active Business Income $400,000

Province

The $500,000 small business limit shrinks by $5 for every $1 of AAII above $50,000, reaching zero once AAII hits $150,000, a hard cliff, not a gradual slope.

Clawback Impact

Remaining SBD Room

$500,000

SBD Room Lost

Extra Corporate Tax From Clawback

Blended Effective Corporate Rate

Effective Corporate Tax Rate vs. Passive Income

Effective Rate On Active Income

This model isolates the SBD grind-down mechanic in isolation. It does not model the refundable dividend tax on hand (RDTOH) system, which refunds some corporate tax on investment income when dividends are eventually paid out, a real offset this simplified view does not capture.

There are structural ways to manage this ceiling.

Corporate-owned insurance, capital dividend account planning, and holding company structures are common tools worth reviewing with an advisor before the clawback fully bites.

Review My Investment Structure →