How do I calculate the right salary amount to pay myself from my Ontario corporation?

There is no single prescribed salary amount, but two common targets guide the calculation. The first is the amount needed to maximize your RRSP contribution room for the following year, since RRSP room is 18% of the current year's earned income. If you want to contribute the maximum to your RRSP next year, you need sufficient salary this year to generate that room — divide the desired RRSP room by 18% to find the required salary.

The second target is the point where your personal marginal rate exceeds the corporate rate. Income earned inside the corporation and left there is taxed at the lower corporate rate. Withdrawing more than you need exposes that income to the higher personal rate, eroding the deferral advantage. Many owner-managers therefore set salary at the point where the next dollar of salary would be taxed at a personal rate significantly above the corporate rate, and draw the rest as dividends if needed.

The calculation also accounts for provincial Ontario Health Premium, CPP contributions, and whether unused RRSP carry-forward room gives you flexibility. Modeling these variables together is a job for accounting software and your accountant. The answer changes every year as your income, corporate profits, and tax rates change.