Income Tax Act subsection 125
The small business deduction is available on active business income for a Canadian Controlled Private Corporation. It provides a reduction in the corporate tax rate up to the federal limit of $500,000.
What the above means is if you are earning active business income as a CCPC then your first $500,000 of net income is taxed at a reduced rate. This makes it easier to amass funds in a corporation and is a large reason many Canadians incorporate their businesses.
Description
Income Tax Act
2016
2017
2018
2019
Part I Tax
1,123(1)
38%
38%
38%
38%
Federal Tax Reduction
1,124(1)
-10%
-10%
-10%
-10%
Small Business Deduction
1,124(5)
-17%
-17.5%
-18.5%
-19%
Reduced Rate
10.5%
10%
9.5%
9%
CRA Resources
IT-73R6 Small Business Deduction
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