For 2026, you can pay your child up to $16,452 in salary from your business without any federal income tax. That figure is the federal basic personal amount, the income anyone can earn before federal tax starts. A child under 18 pays no CPP on those wages either, and in most family businesses the wages are not EI-insurable. If the work is real and the wage is fair, your corporation deducts the full amount and your child keeps nearly every dollar.
The 2026 numbers
The federal basic personal amount rose 2 per cent this year, from $16,129 to $16,452. Wages up to that amount attract no federal income tax in your child’s hands.
Provincial tax is a separate calculation. Ontario’s basic personal amount for 2026 is $12,989, so a child earning the full $16,452 would owe a small amount of Ontario tax on paper, roughly $175, though provincial low-income credits often cover it. Alberta’s personal amount is higher than the federal one, so an Alberta child earning $16,452 pays no provincial tax at all.
Why payroll costs are near zero for a minor
CPP contributions do not start until the month after an employee turns 18. A 15-year-old earning $16,000 from the family company pays nothing into CPP, and neither does the company. Once your child turns 18, CPP applies to earnings above the $3,500 basic exemption.
EI is usually not a cost either. Employment between related persons, including a parent’s corporation and a child, is generally not insurable because you are not dealing at arm’s length. CRA can still treat the job as insurable when the pay and conditions look the same as a deal you would strike with a stranger, so the exemption is not automatic. Confirm how your situation lands before you skip the premiums.
The wage has to survive the reasonableness test
The Income Tax Act lets CRA deny any deduction that is not reasonable, and family wages are the classic target. The questions an auditor asks are simple. Did the child actually do the work? Would you have paid a stranger the same rate for it? Was the money actually paid to the child?
Getting this wrong is expensive. CRA can deny the corporation’s deduction while still treating the amount as paid, so the family ends up taxed on money that produced no deduction, plus interest and possible penalties. A wage tied to real duties, with hours recorded and the money landing in the child’s own bank account, holds up. A round number transferred every December does not.
Pay salary, not dividends
Dividends are the trap for minors. A dividend from the family corporation to a child under 18 is split income under the TOSI rules and gets taxed at the top marginal rate, which erases the entire benefit. Salary works differently. Wages are not split income, so a reasonable salary for actual work is taxed in your child’s own hands at your child’s own rate, and on the first $16,452 the federal rate is zero.
The salary route also builds RRSP room. Earned income creates contribution room at 18 per cent, so a child who earns $16,000 a year through high school starts adulthood with real room already banked. Filing a T1 return to report the income is what locks that in.
Frequently asked questions
Is there a minimum age to put my child on payroll?
The Income Tax Act has no minimum age. Provincial employment standards control what work a child can legally do and at what age, and the duties have to match what a child that age can genuinely deliver. An 8-year-old modelling for product photos is plausible. An 8-year-old doing your bookkeeping is not.
Do I need to run the wages through payroll and issue a T4?
Yes. The corporation needs a payroll account, and the wages should end up on a T4 like any other employee’s. Cash handed over with no paper trail is the exact pattern CRA reassesses. If payroll administration is more than you want to take on, that is part of what we run for owner-managed clients.
Does my child have to file a tax return?
Below the basic personal amount there is usually no tax owing and no requirement to file, but filing is still the right move. It reports the earned income that creates RRSP room and starts a clean history with CRA.
Can I pay my spouse the same way?
Yes, the same logic applies: real work at a wage you could defend to an auditor. Adults bring extra angles, since CPP applies and the reasonable range for the role gets more scrutiny. Our guide on paying your spouse from your business covers the details.
Related guides
- Pay Your Spouse From Your Business in Canada: Salary, Dividends, and the Attribution Trap
- Can You Pay Your Kids From Your Business in Canada?
- Health Spending Accounts (PHSP) for Canadian Small Business Owners
- Corporate Tax for E-Commerce Businesses
Not sure what a defensible wage looks like?
We set up family payroll for owner-managed corporations, from the wage level through the year-end slips that keep the deduction safe. Contact us and we will map it out for your situation.
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