What is the GRIP account and how does the CRA calculate it?
For 2026, GRIP (general rate income pool) is the s.89(1) balance that caps eligible dividends a CCPC can pay without Part III.1 tax. Each year it adds 72% of taxable income left after small business deduction income and aggregate investment income, plus eligible dividends received, and subtracts last year's eligible dividends paid. Any excess is taxed at 20%.
What adds to GRIP and what takes it away
A CCPC can pay eligible dividends up to its GRIP without Part III.1 tax. The CRA measures the pool at the end of the tax year, so your client can pay eligible dividends during the year as long as the total doesn't exceed GRIP at year end canada.ca. The pool tracks taxable income that never got the small business deduction or another special rate.
| Element in s.89(1) | What it is | Effect |
|---|---|---|
| C | GRIP at the end of the preceding tax year | Opening balance |
| D | 72% (the general rate factor) times adjusted taxable income | Adds |
| E | Eligible dividends received in the year, plus certain s.113 foreign affiliate dividend deductions | Adds |
| F | Amounts under s.89(4) to (6): becoming a CCPC, amalgamation, winding up a subsidiary | Adds |
| G | Eligible dividends paid in the preceding year, less any excessive designation made that year | Subtracts |
| B | 72% times the change in full rate taxable income for the three prior years after a loss carryback | Subtracts |
The statute writes it as A minus B, where A is C + D + E + F minus G, and calls the result a "positive or negative amount" laws-lois.justice.gc.ca. A loss carried back, or a large prior year payout, can leave the pool below zero.
The 72% factor and adjusted taxable income
The general rate factor has been 0.72 for every day after 2011, so any 2025 or 2026 tax year uses 72% in full. Earlier years were prorated by days.
| Days in the tax year | General rate factor |
|---|---|
| Before 2010 | 0.68 |
| In 2010 | 0.69 |
| In 2011 | 0.70 |
| After 2011 | 0.72 |
Adjusted taxable income is taxable income minus two things. First, the income your client claimed the small business deduction on (the s.125(1) deduction multiplied by 100 over the deduction rate). Second, for a CCPC, the lesser of aggregate investment income and taxable income laws-lois.justice.gc.ca. What's left is the active business income taxed at the general rate.
Aggregate investment income covers net taxable capital gains and net property income, but not dividends deducted in computing taxable income laws-lois.justice.gc.ca. That investment income feeds the refundable tax pools instead, covered in RDTOH explained.
Worked example: $700,000 of taxable income
Take a CCPC with no associated corporations, so its business limit is the full $500,000 canada.ca. It earns $660,000 of active business income and $40,000 of interest and taxable capital gains. Its passive income for last year was also under the $50,000 point where the business limit starts to shrink, which is the year the s.125(5.1) grind looks at. It also receives $10,000 of eligible dividends from public company shares, deducted under s.112, so taxable income is $700,000. It closed last year with GRIP of $50,000 and paid $30,000 of eligible dividends last year.
| Step | Amount |
|---|---|
| Taxable income | $700,000 |
| Less small business deduction income | ($500,000) |
| Less aggregate investment income | ($40,000) |
| Adjusted taxable income | $160,000 |
| D: 72% of $160,000 | $115,200 |
| C: GRIP at end of last year | $50,000 |
| E: eligible dividends received | $10,000 |
| G: eligible dividends paid last year | ($30,000) |
| GRIP at end of this year | $145,200 |
This year the corporation designates $160,000 of dividends as eligible. The excess is $160,000 minus $145,200, or $14,800. Part III.1 tax at 20% comes to $2,960, due on the balance due day. Next year, G will be $160,000 of eligible dividends minus the $14,800 excess, so $145,200 comes off and the pool restarts at zero before new income.
Excessive designations: the 20% tax or the election
When a CCPC pays more than one eligible dividend, the excess is spread across them: (total eligible dividends minus year end GRIP) times each dividend over the total laws-lois.justice.gc.ca. Part III.1 tax is 20% of the excess, payable by the balance due day
laws-lois.justice.gc.ca.
Your client can avoid it by electing to treat the excess as a separate taxable dividend that is not an eligible dividend, paid just before the original. The election is due 90 days after the CRA sends the notice of assessment for the Part III.1 tax. It needs the concurrence of the corporation and every shareholder who received the dividend and whose address the corporation knew, and it must be made within 30 months of payment unless each of those shareholders concurs laws-lois.justice.gc.ca.
The election is off the table when a main purpose of the transaction was to artificially maintain or increase GRIP. Then the whole designation is excessive, and an extra 10% applies for 30% in total canada.ca. Part III.1 tax is calculated on Schedule 55 and reported on line 710 of the T2.
Schedule 53 and the balance the CRA holds
GRIP is calculated on Schedule 53, General Rate Income Pool (GRIP) Calculation, filed with the T2. The CRA says to file it if the corporation paid an eligible dividend in the year or its GRIP changed, so the balance on CRA records stays correct canada.ca. As of October 2026, the form page lists the 2022 version of T2SCH53 as current
canada.ca.
The year end balance is line 590 of Schedule 53 canada.ca. The CRA says GRIP balances can be viewed with the "View return balances" service in My Business Account if you're the business owner, or in Represent a client if you're an authorized representative
canada.ca. Check that figure against your file before your client declares a large eligible dividend, because the part of the year's eligible dividends above GRIP at year end is an excessive eligible dividend designation
laws-lois.justice.gc.ca.
Edge cases: amalgamations, wind ups and late designations
On an amalgamation, the new CCPC picks up each CCPC predecessor's GRIP under s.89(5). On a s.88(1) wind up, the parent adds the subsidiary's GRIP under s.89(6). A predecessor or subsidiary that wasn't a CCPC brings in a computed amount instead, built from its property, cash and certain balances, the same way s.89(4) works for a corporation that becomes a CCPC laws-lois.justice.gc.ca.
A dividend is eligible only if the corporation designates it in writing to each shareholder at the time it pays the dividend, unless the CRA accepts a late designation made within three years as just and equitable under s.89(14.1) laws-lois.justice.gc.ca. Tax free capital dividends come from a different pool; see capital dividend account. For how the shareholder is taxed on what you designate, see dividend gross up 2026.
Sources
Do eligible dividends paid this year reduce this year's GRIP?
No. Element G subtracts eligible dividends paid in the preceding year, so this year's payouts come off next year's pool laws-lois.justice.gc.ca. The Part III.1 test still compares this year's eligible dividends against GRIP at this year end.
Can GRIP be negative?
Yes. The s.89(1) formula produces a positive or negative amount, for example after a loss carryback reduces prior full rate taxable income. With GRIP at or below zero, every dollar designated eligible that year is excessive laws-lois.justice.gc.ca.
Does a taxable capital gain add to GRIP?
No, not for a CCPC. Net taxable capital gains are aggregate investment income, which comes out of adjusted taxable income before the 72% is applied laws-lois.justice.gc.ca.
Can my client designate only part of a dividend as eligible?
Yes. A corporation can designate a portion of a taxable dividend rather than the whole amount canada.ca. That's the simplest way to keep the designation inside GRIP.
General information for the tax year shown, not advice for a specific client. Confirm the facts before you file or remit.