An Ontario corporation pays a combined federal-plus-provincial corporate income tax rate of 12.2% on the first $500,000 of active business income through June 30, 2026, dropping to 11.2% on or after July 1, 2026 under a legislated small-business rate cut. Active business income above the small-business range is taxed at a combined 26.5% general rate throughout the year. Alongside the rate cut, Ontario is also raising its own small-business limit from $500,000 to $600,000 — but the federal limit is staying at $500,000, which creates a hybrid tax band that catches many owner-managers off guard. This guide walks through the 2026 rates, the mid-year change, and how Ontario compares with Alberta and British Columbia.
Ontario corporate income tax rates for 2026
Like every province except Alberta and Quebec, Ontario does not operate a standalone corporate tax collection system. The Canada Revenue Agency (CRA) administers Ontario's corporate income tax under a federal-provincial collection agreement, so an Ontario corporation files a single federal T2 Corporation Income Tax Return that already builds in the Ontario rate — there is no separate provincial corporate return, unlike Alberta's AT1.
As of the 2026 tax year, the combined rates are:
| Income type | Federal rate | Ontario rate | Combined rate |
|---|---|---|---|
| Active business income up to $500,000 (CCPC small-business), before July 1, 2026 | 9% | 3.2% | 12.2% |
| Active business income up to $500,000 (CCPC small-business), on/after July 1, 2026 | 9% | 2.2% | 11.2% |
| Active business income above the small-business range (general) | 15% | 11.5% | 26.5% |
The 3.2% → 2.2% Ontario small-business rate cut, and the corresponding 12.2% → 11.2% combined drop, take effect July 1, 2026. Corporations with a non-calendar fiscal year that straddles the effective date generally prorate the two rates over the days falling before and after July 1, the standard approach the CRA applies whenever a corporate tax rate changes mid-year — confirm the exact proration mechanics for your fiscal year with your tax preparer or the CRA.
The July 1, 2026 small-business rate cut and limit increase
The rate cut is legislated under Bill 12, the Cutting Taxes on Small Businesses Act, 2025, which does two things at once, both effective July 1, 2026:
- Lowers the Ontario small-business corporate income tax rate from 3.2% to 2.2%.
- Raises Ontario's own small-business limit from $500,000 to $600,000.
Both changes are aimed squarely at small and mid-sized Ontario corporations, lowering their tax bill on the same income and letting more income qualify for the low provincial rate.
The hybrid band: why $500,000–$600,000 is different
The Ontario limit increase is provincial-only — the federal small-business limit stays at $500,000. Before July 1, 2026, Ontario's $500,000 limit matched the federal limit, so the small-business and general bands lined up cleanly. After July 1, 2026, they no longer do, and a $100,000 gap opens up:
| Income band (fiscal periods on/after July 1, 2026) | Federal rate | Ontario rate | Combined rate |
|---|---|---|---|
| $0 – $500,000 | 9% (small-business) | 2.2% (small-business) | 11.2% |
| $500,000 – $600,000 | 15% (general — above the federal limit) | 2.2% (small-business — below the Ontario limit) | 17.2% |
| Above $600,000 | 15% (general) | 11.5% (general) | 26.5% |
Income in the $500,000–$600,000 band gets a blended rate: it loses the federal small-business deduction because it exceeds the $500,000 federal limit, but it still qualifies for Ontario's low 2.2% rate because it falls under Ontario's new $600,000 limit. The result is a combined 17.2% — cheaper than the 26.5% general rate, but more than the 11.2% small-business rate on the first $500,000. Corporations that expected the higher Ontario limit to fully mirror a federal-style small-business rate on that extra $100,000 should not assume that; only the provincial portion improves.
As with the federal small-business deduction, Ontario's limit is shared among associated corporations and can be ground down where a CCPC and its associated group earn significant passive investment income — see our small business deduction limit guide for the federal grind-down mechanics that interact with Ontario's rules.
Ontario vs Alberta vs BC: a 2026 rate comparison
Ontario sits between Alberta and BC on both the small-business and general rates:
| Province | Small-business combined rate (2026) | General combined rate (2026) | Own corporate return? |
|---|---|---|---|
| Alberta | 11% | 23% | Yes — AT1, filed separately with TRA |
| British Columbia | 11% | 27% | No — filed with the T2 |
| Ontario | 12.2% (11.2% on/after July 1, 2026) | 26.5% | No — filed with the T2 |
On small-business income, Ontario's post-July-1 combined rate of 11.2% is close to Alberta's and BC's 11%. On general income, Ontario's 26.5% sits between Alberta's low 23% and BC's higher 27%. Businesses comparing Ontario to Alberta specifically should also weigh Alberta's AT1 filing obligation against Ontario's simpler single-T2 filing — see our Alberta corporate tax guide and BC corporate tax guide for the full provincial pictures, and our Alberta vs BC business tax comparison for a deeper side-by-side of those two.
Sales tax and payroll tax context for Ontario corporations
Corporate income tax is only part of an Ontario business's tax stack. Ontario charges a single harmonized 13% HST rather than separate GST and PST, and employers whose Ontario payroll exceeds the exemption threshold also pay the Employer Health Tax (EHT). We cover both in detail in our Ontario Employer Health Tax guide and our step-by-step incorporating in Ontario guide. For the sales-tax landscape nationally, see our GST/HST/PST guide for Canadian business.
How RN Canada helps
RN Canada is an accounting and advisory firm headquartered in Edmonton, with a Vancouver office, serving Ontario and Toronto-area clients remotely from our head office. Led by Ozgur Duymaz, Ph.D., CPA (Canada), ACCA (UK), CMA (US), we prepare T2 corporate returns for Ontario CCPCs, model the July 1, 2026 rate change and the $500,000–$600,000 hybrid band for your specific fiscal year-end, and plan around associated-company and passive-income grind-down rules. Explore our tax return preparation service or estimate your liability with the corporate tax calculator. Learn more about how we serve businesses in Ontario and Toronto.
Frequently asked questions
For the 2026 tax year, an eligible Canadian-controlled private corporation pays a combined federal-plus-Ontario rate of 12.2% on the first $500,000 of active business income before July 1, 2026, dropping to 11.2% on or after July 1, 2026. Active business income above the small-business range is taxed at a combined 26.5% (15% federal general plus 11.5% Ontario general), unchanged through the year.
Yes. Under Bill 12, the Cutting Taxes on Small Businesses Act, 2025, Ontario's small-business corporate income tax rate drops from 3.2% to 2.2% effective July 1, 2026. Combined with the federal 9% small-business rate, that lowers the combined small-business rate from 12.2% to 11.2% for income earned on or after the effective date.
Yes. Alongside the rate cut, Ontario is raising its own small-business limit from $500,000 to $600,000 effective July 1, 2026. This is a provincial-only change — the federal small-business limit stays at $500,000 — which creates a $100,000 band where the two limits no longer match.
It falls into a hybrid band. Because Ontario's small-business limit rises to $600,000 but the federal limit stays at $500,000, active business income in that $100,000 gap gets Ontario's low 2.2% provincial rate but the federal general 15% rate (not the federal 9% small-business rate), for a combined 17.2% on that slice — lower than the 26.5% general rate but higher than the 11.2% small-business rate.
No. Ontario corporate income tax is administered by the Canada Revenue Agency (CRA) under a federal-provincial collection agreement, so an Ontario corporation files a single federal T2 return that already accounts for the Ontario rate. This is unlike Alberta, which requires a separate AT1 return filed with Tax and Revenue Administration in addition to the T2.
On small-business income, Ontario's 2026 combined rate (12.2% before July 1, 11.2% after) sits above Alberta's 11% and matches BC's 11%. On general income, Ontario's 26.5% combined rate is between Alberta's 23% and BC's 27% — meaningfully higher than Alberta, slightly lower than BC.
Ontario's general corporate income tax rate is 11.5% provincially, which combines with the 15% federal general rate for 26.5% combined. This rate applies to active business income above the small-business range and to most income earned by corporations that do not qualify for the small-business deduction.
Yes. Our corporate tax calculator estimates federal-plus-provincial corporate income tax and can be used to model Ontario's small-business and general bands, including the July 1, 2026 rate change. It is free and needs no sign-up.