Example · British Columbia
Should an incorporated doctor take salary or dividends?
Daniel is a family doctor in Vancouver, 42, with $3 million invested in his medical corporation. He pays himself a $95,000 salary and takes dividends for the rest. Would taking the dividends that free its refundable tax first, then a salary, leave him more? Or a salary big enough for the most RRSP room?
The household
- The corporation bills $420,000 a year and pays $110,000 a year in clinic overhead, until Daniel retires at 60.
- It holds $3 million invested and $40,000 in its operating account. Its capital dividend account has $85,000.
- Daniel has $140,000 in his RRSP and $60,000 in his TFSA.
- His home is worth $1.6 million, with $700,000 left on the mortgage. He spends $8,000 a month, plus the mortgage and the home's upkeep.
What Kilter found
As now, Daniel's chance of success is 96% and his estate after tax is $8.2 million.
Taking refundable tax first, his estate is $8.4 million, about $209,000 more. His chance of success is the same. Over his life he pays about $357,000 less in personal tax, and his corporation about $176,000 more in corporate tax. Taking refundable tax first, Kilter also draws his RRSP down in his first years. It's empty by 2028, when he's 44. At the end of 2044, the year he retires, his corporation holds $6.3 million against $5.5 million as now.
The $197,000 salary leaves an estate of $7.8 million, about $398,000 less than as now. His chance of success is the same. It moves tax from the corporation to Daniel. He pays about $541,000 more in personal tax over his life, and his corporation about $392,000 less. At the end of 2044, his RRSP holds $1.1 million against $641,000 as now. His corporation holds $4.9 million against $5.5 million.
| Choice | Chance of success | Estate after tax | Tax over a lifetime |
|---|---|---|---|
| As now: $95,000 salary, then dividends | 96% | $8.2 million | $6.1 million |
| Refundable tax first, then salary, to 60 | 96% | $8.4 million | $5.8 million |
| $197,000 salary, then dividends | 96% | $7.8 million | $6.1 million |
Estate and tax in today's dollars, assuming typical returns. Tax is personal, corporate and at death.
- As now: $95,000 salary, then dividends
- Refundable tax first, then salary, to 60
- $197,000 salary, then dividends
- Half the simulations end inside the band (As now: $95,000 salary, then dividends)
Why how he's paid matters
A corporation pays tax on what its investments earn, and gets part of it back when it pays taxable dividends. Its capital dividend account comes out tax-free. A salary is deductible to the corporation and taxed to the doctor, and it earns RRSP room and CPP. Each way of paying moves tax between the corporation, the doctor and the estate, and changes how much stays invested.
Of the three, taking refundable tax first leaves Daniel's heirs the most. Another household's answer depends on how much its corporation has invested, what it earns and what the household spends. Kilter runs every month of each choice, with each year's tax, to see.
Open this household in KilterA free demo, no sign-up. Change anything you like.
How Kilter worked it out
Kilter ran this household month by month from November 2026 to the end of the plan, with each year's federal and provincial tax, the corporation's own tax and the tax at death. The chance of success is the share of 2,000 market simulations in which every expense is paid. Everything else assumes typical returns, in today's dollars with 2.5% inflation. The household is made up from a real question. Open it as a demo to change anything and see it all recalculate.