Effective July 1, 2026, Ontario dropped its small business corporate income tax rate from 3.2% to 2.2% on the first $500,000 of active business income for qualifying CCPCs, lowering the combined federal-plus-Ontario rate from 12.2% to 11.2%. Corporations with a 2026 calendar year-end get a prorated Ontario rate of about 2.7% (roughly 11.7% combined) because the cut lands mid-year.
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Ontario cuts small business corporate tax rate to 2.2% as of July 1, 2026
Why this matters for founders
An incorporated Ontario founder claiming the small business deduction keeps an extra 1% of the first $500K in profit; check that your accountant applies the prorated blended rate for a straddling 2026 year-end when filing.
Source: Welch LLP
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