Small business deduction (SBD) – Canada Revenue Agency

ByMaurice

Description:

Corporations that were Canadian-controlled private corporations (CCPCs) throughout the tax year may be able to claim the small business deduction (SBD). The SBD reduces Part I tax that the corporation would otherwise have to pay.

Comments on Funding:

The SBD is 19% of whichever of the following amounts is less:

  •  the income from active business carried on in Canada (line 400)
  • the taxable income (line 405),
  • the business limit (line 410),
  • the amount on line 428, which is the reduced business limit on line 426 from which you deduct the amount of the business limit you assigned under subsection 125(3.2). 

The basic rate of Part I tax being 38% of your taxable income, 28% after the federal tax abatement, the SBD rate results in a 9% tax rate. 

Eligibility:

The applicant must be:

  • Be a Canadian–controlled private corporations (CCPCs),
  • Have an active business income carried on in Canada.

Applications Steps:

Applicants must calculate the SBD and enter it on Line 430 – Small business deduction of the T2 Corporation Income Tax Return form.

About the author

Maurice

Maurice (Moe) Muise learned the ins-and-outs of government while an employee of the Government of Canada in Ottawa for 10 years. His current focus is helping small businesses in Ontario to identify and maximize government grants to grow their business. Click here to learn more about Moe’s background and how he can help your business.

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