GOOD NEWS

  • Corporate income tax rate for small business corporations is reduced from 12.2% to 11.2% (combined Federal and Ontario income taxes) effective July 1, 2026. This will benefit all dentistry professional corporations (PCs) and technical/hygiene service corporations (T/HSCs) on the first $500,000 of annual active business income.  All other corporate income tax rates (for business income over $500,000 per year and for investment income) remain unchanged.
  • The HST rebate for new homes by any purchaser valued up to $1 million will be enhanced to remove the 8% provincial portion of the HST, providing a rebate of up to $80,000. This rebate will be retained for new homes valued up to $1.5 million, then gradually phased out up to a value of $1.85 million.  This rebate will be available for agreements entered into with builders between April 1, 2026 and March 31, 2027. To qualify for the enhanced rebate, the new home must be used as a primary residence, or as a residential rental property.
  • For first time home buyers, Ontario will rebate the 8% provincial portion of the HST on qualifying new homes up to $1 million, which will be phased out gradually between $1 million and $1.5 million. First-time home buyers may also be eligible for a rebate on the 5% federal GST portion, resulting in a combined rebate of up to $130,000 (calculated as $1 million * 13% combined HST). The First-Time Home Buyers’ HST Rebate will apply for agreements entered into between March 20, 2025 and December 31, 2030. To qualify, the first time home buyer must use the home as their primary residence.

BAD NEWS

  • The maximum tax rate on non-eligible dividends paid out from any private corporation (PC, T/HSC, Holdco, etc) will increase from 47.74% to 48.89% effective January 1, 2027.
  • The Regional Opportunities Investment Tax Credit (ROITC), which provides significant tax rebates for purchases of qualifying commercial real estate in remote/rural areas of Ontario, will be eliminated as of January 1, 2027.
  • The Budget predicts significant deficits up to at least 2028.

What does this mean for you?

  • PCs and T/HSCs earning up to $500,000 per year of business income will enjoy annual tax savings up to $5,000.
  • There are no other significant changes for dentists in this budget.

 What can I do?

  • If any family member is considering the purchase of a home that is eligible for the enhanced HST rebates, ensure the agreement is entered into prior to the expiration of these rebates.
  • If you are planning to purchase commercial real estate eligible for the ROITC in the near future, do so before the end of 2026.

CORPORATE/BUSINESS:

What will your corporate tax bill be (after June 30, 2026)?

Taxable Income ($) 2026 Combined Federal & Ontario Tax Rate (%)
Up to $500,000 Between 11.2% and 17.2%*
500,000+ 26.50%

*Subject to reduction of small business deduction based on passive income earned by the corporation or any associated corporation.  If annual investment income is under $50,000, the 11.2% rate should apply.

Applies to active business income of a Canadian Controlled Private Corporation (CCPC) i.e., Dentistry Professional Corporation (DPC), Hygiene/Technical Service Corporation (H/TSC).

Different types of corporate investment income are taxed at different rates. A portion of the corporate taxes paid on investment income can be recovered when taxable dividends are paid to shareholders.

Type of Investment Income Tax Rate Recoverable Taxes Paid Net Tax
Interest/rental 50.17% 30.67% 19.50%
Capital gains 25.08% 15.33% 9.75%
Dividends 38.33% 38.33% 0.0%

 

This summary was prepared by DCY Professional Corporation Chartered Professional Accountants who have been advising dentists/doctors for decades. Additional information can be obtained by phone (416) 510-8888, fax (416) 510-2699, or e-mail david@dcy.ca, basil@dcy.ca, louise@dcy.ca, eugene@dcy.ca. Visit our website at: www.dcy.ca. This article is intended to present tax saving and planning ideas and is not intended to replace professional advice.