Taking Money Out of Your Corporation to Buy a House
There is cash in the company and you need a down payment. Work out the gross salary or dividend required to land the amount you actually need, what each one costs the corporation, whether any of it can come out tax free, and what happens if you simply transfer it and deal with it later.
company cash consumed
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What Can Come Out Tax Free
| Source | Basis | Amount |
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Salary Against Dividend on the Taxable Balance
| Item | Basis | Salary | Dividend |
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Splitting It Across Two Calendar Years
| Approach | Basis | Amount |
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If You Just Take It as a Loan
| Item | Basis | Result |
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Points to Settle Before the Money Moves
What to Do Next
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Disclaimer: Personal tax is calculated on 2026 Ontario and federal brackets with the Ontario surtax, layered on the other income you enter, so the marginal effect is correct even though personal credits beyond the basic amounts are not modelled. Basic personal amounts are taken as $16,500 federally and $12,950 in Ontario and are approximate. Canada Pension Plan uses maximum pensionable earnings of $74,600, additional maximum earnings of $85,000, the $3,500 exemption, 5.95% and the 4% second contribution. Non-eligible dividends use a 15% gross-up with federal and Ontario dividend tax credits. Company cash consumed treats salary as deductible at the 11.2% small business rate and a dividend as paid from after-tax retained earnings. The prescribed rate for imputed interest is taken as 3% and changes quarterly. Whether a home purchase loan qualifies under the employee exception in subsection 15(2.4) is a question of fact and is examined closely for controlling shareholders. This page is general information, not tax advice.
Check the Free Money Before You Pay Any Tax
Owners routinely declare a large dividend when part of the cash could have come out with no tax at all. Two sources are worth checking before anything else, and both are commonly overlooked.
| Source | Tax | What It Needs |
|---|---|---|
| Shareholder loan the company owes you | None | A supported credit balance in the books |
| Capital dividend account | None | A resolution and Form T2054 filed on time |
| Return of paid-up capital | None up to the paid-up capital | A proper reduction, usually with legal help |
| Salary | Full marginal rates plus both halves of CPP | Payroll registration and remittances |
| Non-eligible dividend | Up to 47.74% personally | A resolution and a T5 |
The shareholder loan balance is the one most often missed. Owners pay company expenses on personal cards for years without recording them. Every one of those builds a credit balance the company owes back, and drawing it down is a repayment of your own money rather than income. It is worth a proper reconstruction before you declare anything.
Salary or Dividend Depends on Your Other Income
There is no universal answer, and pages that give one are wrong. The dividend tax credit is very valuable in the lower brackets and much less so at the top, so the winner flips depending on what you are already earning.
| Your Other Income | Usually Cheaper | Why |
|---|---|---|
| Nil or very low | Dividend | The dividend tax credit works hardest in the low brackets, and no CPP is payable |
| Moderate | Close, run the numbers | The corporate deduction on salary starts to outweigh the credit |
| Already at the top rate | Usually salary | The 11.2% corporate deduction beats the shrinking dividend credit, and CPP is already maxed |
| Payroll already above $1,000,000 | Dividend | Employer health tax at 1.95% is added to every extra dollar of salary |
The Mistake That Costs the Most
Do not simply transfer the money and sort it out later. A draw that is not a salary, a dividend or a loan repayment is a shareholder loan. Subsection 15(2) includes it in your income for the year the loan was made unless it is repaid within one year after the end of the corporate year in which it arose. Miss that and the CRA reassesses a year you have already filed, with interest running from the original balance due date.
Repaying just before the deadline and immediately redrawing does not help. A series of loans and repayments is looked through, and the CRA treats the arrangement as a single continuing loan.
The Home Purchase Loan Exception, and Why It Rarely Helps
There is an exception for a loan made to an employee to acquire a dwelling for their own habitation, with bona fide repayment arrangements made at the time. It sounds like the answer to this exact question.
The difficulty is the qualifying condition. The loan has to be received by virtue of employment rather than by virtue of shareholdings. For a controlling shareholder who is also the only employee, that distinction is very hard to demonstrate, and the CRA looks at whether an arm’s length employee in the same position would have been offered the same loan. Where it does work, an imputed interest benefit at the prescribed rate applies each year, and the rate is fixed at the rate in effect when the loan was made for the first five years.
It is a real provision, not a myth, but it is not a shortcut and it should never be used without advice and proper documentation in place before the money moves.
Splitting Across Two Calendar Years
A large withdrawal pushes you into the top bracket for a single year. Taking part in December and the rest in January uses the lower brackets twice, and on a $200,000 down payment that is frequently worth several thousand dollars for nothing more than timing.
The constraint is the closing date. If the deposit is due in March, you can still take part in the prior December and the rest in January. If you are closing next week, the option is gone, which is why this conversation should happen before the offer rather than after.
What the Lender Needs
| Route | Documentation | Lender Comfort |
|---|---|---|
| Salary | T4, pay stubs, letter of employment | High, treated like any employee |
| Dividend | Two years of T5s, notices of assessment, financial statements | Workable, but needs history |
| Shareholder loan repayment | Financial statements showing the balance | Not income, so it does not help you qualify |
Note the last row carefully. Tax-free money is excellent for funding the down payment and useless for qualifying, because a lender is testing your income rather than your cash. Someone who has taken minimal salary for years to save tax often finds that is exactly what stops the mortgage.
The Corporation Cannot Buy the House
Occasionally someone suggests the company buys the home and the owner lives in it. The value of that occupation is a taxable shareholder benefit every single year, on top of land transfer tax paid on the way in, no principal residence exemption on the way out, and a mortgage the lender will price as commercial.
It is one of the most expensive structures available and there is almost never a case for it on a personal residence.
Practical Sequence
- Reconstruct the shareholder loan account and take anything the company owes you first.
- Check the capital dividend account and file Form T2054 before any capital dividend becomes payable.
- Compare salary and dividend against your actual other income for the year rather than a general rule.
- Split across two calendar years if the closing date allows it.
- Document everything with resolutions and slips at the time, not at year end.
- Plan for the instalments the following year, because a large withdrawal usually creates them.
What This Calculator Does Not Cover
- Personal credits beyond the basic amounts, which vary too much to model
- Eligible dividends where a general rate income pool balance exists
- Return of paid-up capital, which needs a legal review
- The Home Buyers’ Plan and the First Home Savings Account, both of which should be used first if available
- Provinces other than Ontario
- Corporate cash flow, and whether the business can actually spare the money
Have the conversation before the offer, not after the closing. Almost everything on this page depends on timing, and timing is the one thing that cannot be fixed retroactively. Our tax planning service covers the withdrawal strategy, the resolutions and the slips.
Frequently Asked Questions
Common questions from incorporated owners buying a home.
Related Calculators and Guides
More tools for incorporated owner-managers.
Talk to Us Before the Offer, Not After the Closing
Send us your last financial statements and your income for the year. We will reconstruct the shareholder loan account, check the capital dividend balance, work out the cheapest route and prepare the resolutions and slips.