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Trucking

Should an owner-operator truck driver incorporate, or stay a sole proprietor?

Incorporating creates no new truck deductions. What it buys is a lower rate on profit you leave in the company, plus personal services business risk.

By Matthew Reeves, FounderAugust 23, 2026 · 8 min read
Show figures for

Quebec runs its own corporate tax regime through Revenu Québec, and Cadence doesn't currently serve Quebec. The figures below are Ontario's.

Summary

There are three ways to drive freight for a living, and the first is to be an employee on a carrier’s payroll. You can also be a sole proprietor, which means you and the business are the same person in law, and your fuel, repairs and truck depreciation go on Form T2125 with your personal tax return. Or you can work through a corporation you own, a separate legal company that files its own tax return, the T2.

We’d recommend staying a sole proprietor, or taking a payroll job, until three things are true at once. You own the truck, or hold a lease in your own name that you’d still owe on if you stopped hauling for this carrier. You pay for the fuel, repairs, insurance and plates yourself, and your profit leaves something over once your family’s living costs and the personal tax on them are covered. A corporation’s low tax rate only reaches profit you leave inside it. A driver who takes everything out to live on has bought a corporate tax return, financial statements and a payroll account for very little.

There’s also a hazard that deserves particular attention in trucking. If you’d be an employee of the carrier had your corporation never existed, the CRA can treat that corporation as a personal services business. Such a corporation pays 33% federal tax rather than 9%, and loses almost every deduction with it. The CRA says it’s reviewing these businesses in trucking specifically, so 2026 is a poor year to bet on nobody looking. Our should you incorporate calculator prices both routes on your own profit and living costs, and shows what a year of the corporation has room to cost.

What incorporating doesn’t change

The most expensive misunderstanding in this decision is that incorporating creates truck deductions a sole proprietor can’t claim. There are none. Fuel, repairs, tires, insurance, licence plates, permits, accounting fees and loan interest come off your income either way, and GST/HST works the same in both forms as well.1

Depreciation matches too. The CRA sorts business assets into numbered classes, each with its own annual write-off rate. Its guidance for sole proprietors puts a freight truck rated above 11,788 kg in Class 16. That threshold is the gross vehicle weight rating on the door plate, not what the truck weighs as it sits. Class 16 allows capital cost allowance, which is the tax version of depreciation, at 40% a year of what’s left of the truck’s cost, and a corporation claims that same 40%.2

The rate on profit you leave inside

What genuinely changes is the rate on profit, and only on profit that stays in the business. A sole proprietor pays personal income tax on all of their net business income in the year it’s earned, at the usual rates that step up as income rises.

A corporation instead pays the federal small business rate of 9% on its first $500,000 of annual profit from hauling freight.3 Profit means revenue minus expenses, not the gross amount the carrier pays you. Above $500,000 the federal rate is 15% instead, which comes to about 26.5% combined in Ontario for 2026about 27% combined in British Columbia for 2026about 23% combined in Alberta for 2026about 27% combined in Saskatchewan for 2026about 27% combined in Manitoba for 2026about 29% combined in New Brunswick for 2026about 29% combined in Nova Scotia for 2026about 30% combined in Prince Edward Island for 2026about 30% combined in Newfoundland and Labrador for 2026 once the province adds its own general rate. Below the limit, the combined federal and provincial rate depends on where you file: an Ontario company pays about 11.7% corporate tax for a December 31, 2026 year-end, after a mid-year Ontario rate changea British Columbia company pays about 11% corporate tax for a December 31, 2026 year-endan Alberta company pays about 11% corporate tax for a December 31, 2026 year-enda Saskatchewan company pays about 10% corporate tax for a December 31, 2026 year-enda Manitoba company pays about 9% corporate tax for a December 31, 2026 year-enda New Brunswick company pays about 11.5% corporate tax for a December 31, 2026 year-enda Nova Scotia company pays about 10.5% corporate tax for a December 31, 2026 year-enda Prince Edward Island company pays about 10% corporate tax for a December 31, 2026 year-enda Newfoundland and Labrador company pays about 11% corporate tax for a December 31, 2026 year-end.4

However, the gap between that corporate rate and your personal rate is a delay rather than a discount. Money you take out as salary or dividends gets taxed again in your hands, and Canada’s tax system is built so the two steps together land close to what a sole proprietor pays. Tax you postpone rather than avoid is called deferral, and it only exists on dollars that stay behind.

So run one subtraction first: take your annual net profit, subtract the personal income tax you’d pay on it, then subtract what your household actually spends. What’s left is the only money a corporate rate can help with, and it’s often smaller than the revenue figure suggests.

Weigh whatever deferral you find against what a corporation costs every year. There’s a corporate tax return (the T2), a set of year-end financial statements your accountant prepares, and books kept apart from your own. There’s also a payroll account with the CRA, so the company can legally pay you a wage with tax withheld. You can incorporate federally for $200 online in 2026, or in your province, where fees vary by registry, but the accounting is the cost that recurs.5

Personal services businesses in trucking

Before pricing an incorporation, answer one question: if your corporation had never existed, would you be an employee of the carrier? Where the honest answer is yes, incorporating produces a personal services business. The Income Tax Act applies that label where the person doing the work holds a large enough stake in the corporation, and would reasonably be regarded as an employee of the customer but for the corporation.6

Five conditions have to be met, and a one-truck company meets four of them without trying, because you own the shares, you do the driving, the carrier is the customer and you employ nobody. What’s left is the test of whether you’d be an employee but for the corporation, third on the CRA’s own list. It turns on ordinary facts: who picks the loads and whether you can refuse them, who owns or leases the truck, who carries the loss on a bad month, and how many customers you have. Our guide to personal services business risk works through the full test.

A finding of that kind costs you three things, and the first is that the corporation loses both federal rate reductions. Federal corporate tax starts at 38% of taxable income, and every corporation gets an automatic 10-point cut because provinces tax the same income, which brings it to 28%. A normal small trucking company then gets a further cut down to 9%. A personal services business gets neither that cut nor the one that would otherwise bring it to 15%, so it stays at 28%.3 A further federal tax of 5% then applies to everything the corporation earns from that work, taking the federal rate on it to 33%.7

Second, almost every expense stops being deductible, because section 18(1)(p) of the Income Tax Act limits the corporation to the salary and benefits it paid the person doing the work, plus a short list of selling and debt-collection costs.8 Fuel, repairs, insurance, plates and truck depreciation are all off that list, so the tax falls on revenue less whatever salary the corporation actually paid. In a review of past years that’s usually most of the revenue, because no salary was ever run.

Third, your province charges the general corporate rate on that income rather than its small business rate, so the provincial side moves the same way the federal side just did.

Enforcement in 2026

The CRA’s fact sheet on personal services businesses, updated on April 13, 2026, says the agency is reviewing them “particularly those in the trucking industry”.9 Budget 2025 proposed $77.0 million over four years for that work, starting in the government’s 2026-27 fiscal year (i.e. April 2026 to March 2027), and that funding is still only a proposal.10 What did become law is quieter, and it has been in force since March 26, 2026. The Income Tax Act now lets the CRA hand your tax information to Employment and Social Development Canada, the department that enforces the Canada Labour Code. The stated purpose is enforcing that code against the misclassification of employees.11

Carriers that require incorporation

A carrier that will only sign incorporated drivers is describing its own preference rather than a rule of tax law, and incorporating to meet that condition doesn’t change the facts underneath. Those facts are what the CRA weighs, and now what Employment and Social Development Canada can be told about. So the real comparison isn’t incorporating against staying a sole proprietor but this contract against your next-best one.

A payroll job paying about what you keep after the truck’s running costs comes with Employment Insurance. If the work dries up you can claim payments while you look for more, as long as you qualify on hours and on why the job ended. Salary from a company whose voting shares you control more than 40% of isn’t insurable employment, so that salary earns no regular EI benefits. You can separately register for the self-employed special-benefits program, subject to its qualifying conditions, which is a different decision.1213 What the payroll job costs you is write-offs, since an employee can claim far less against their income than a business can.

How often this changes

Re-run this decision once a year when you do your books, and straight away if any of the following happens.

  • You buy the truck or take a lease in your own name and start paying the running costs yourself, because those facts weigh most in the personal services business question.
  • A second and third customer appear, with rates you negotiate and loads you’re free to refuse.
  • The CRA writes to you about personal services businesses, in which case get advice before you answer it.

Closing thoughts

What separates this from the ordinary incorporate-or-not question is how unevenly the two sides are weighted. Incorporating early buys a delay you may never use, because the money went to the household anyway. Getting it wrong buys a reassessment, meaning the CRA reopens returns you’ve already filed, normally going back three years, and disallows the fuel, the repairs and the truck depreciation in every one of them at once. Waiting until the facts are on your side costs very little against that.

How we handle it

We look at the facts before the structure: who owns the truck, who pays for the fuel, how many payers there are, and what’s left once the household has been paid. Where incorporating is right, we set up the corporation, register the payroll account, pick the company’s financial year end, then file the T2 and your personal return together. Where it isn’t, we say so and keep you filing a T2125.

Footnotes

  1. Canada Revenue Agency, “Compliance requirements for the trucking industry”, verified 2026-08-23. The page states that you do not need to be incorporated to register for GST/HST, and that sole proprietors, partnerships and corporations follow the same rules. Two freight-specific points on the same page are worth knowing in either form. The rate you charge follows where the load is delivered, so the destination province’s rate applies to a shipment between provinces. And a carrier providing services as part of another carrier’s shipment (i.e. an interlining arrangement) does not charge GST/HST to the invoicing carrier, because those services are generally zero-rated. Registration itself, including the threshold and its measurement windows, is owned by our GST/HST registration guide. ↩

  2. Canada Revenue Agency, “Classes of depreciable property” (sole proprietorships and partnerships), verified 2026-08-23. Class 16 covers freight trucks acquired after December 6, 1991 and rated above 11,788 kg, written off at 40% on a declining balance. ↩

  3. Canada Revenue Agency, “Corporation tax rates”, verified 2026-08-23. The basic Part I rate is 38% of taxable income, 28% after the federal tax abatement, and 15% after the general tax reduction. The small business deduction takes an eligible Canadian-controlled private corporation to 9% on the first $500,000 of active business income. A personal services business receives neither the small business deduction nor the general tax reduction, which the CRA confirms on its personal services business fact sheet. Our guide to what changed for 2026 is the library’s owner page for the federal 9% figure. ↩ ↩2

  4. For Ontario: Ontario Ministry of Finance, Corporations Tax: Corporate Income Tax (ontario.ca), corroborated by 2026 Ontario Budget - Annex: Details of Tax Measures (budget.ontario.ca/2026/annex.html) and Bill 97 status page (ola.org). Verified 2026-08-13. The rate reduction is prorated for taxation years straddling July 1, 2026 (Ontario 2026 Budget annex: 'The tax rate reduction would be prorated for taxation years straddling July 1, 2026.'). Enacted by Bill 97, Plan to Protect Ontario Act (Budget Measures), 2026, S.O. 2026, c. 2, which amends s. 31(4) of the Taxation Act, 2007 so the small business deduction rate is 9.3% for days in a taxation year after June 30, 2026 (11.5% general rate minus 9.3% = 2.2%). The combined 11.7% adds the federal 9% small business rate to the Ontario lower rate and is our arithmetic.For British Columbia: Province of British Columbia (Ministry of Finance), Corporate income tax rates – Province of British Columbia. Verified 2026-08-13. Rate of 2% effective April 1, 2017, and a business limit of $500,000 effective January 1, 2010. Budget 2026 (tabled February 17, 2026) announced no corporate income tax rate changes. The combined 11% adds the federal 9% small business rate to the British Columbia lower rate and is our arithmetic.For Alberta: Government of Alberta - Treasury Board and Finance / Tax and Revenue Administration, Tax, levy, and prescribed interest rates. Verified 2026-08-13. The current-rates table on the issuer page lists 2% with effective date July 1, 2020 (the rate has been 2% since 2017, and July 1, 2020 is the current table row). Alberta Budget 2026 (tabled 2026-02-26) made no corporate rate changes. The issuer rate table loaded 2026-08-13 shows no pending 2026 change. The combined 11% adds the federal 9% small business rate to the Alberta lower rate and is our arithmetic.For Saskatchewan: The Income Tax Act, 2000, c I-2.01 (Saskatchewan), King's Printer consolidation, The Income Tax Act, 2000, s. 56(2) - Rates of tax. Verified 2026-08-13. Rate history in s. 56(2): 2% to Sept 30 2020, then 0% Oct 1 2020 - Jun 30 2023, then 1% from Jul 1 2023 with no end date. The 2026-27 budget (tabled March 18, 2026) makes no change: budget.saskatchewan.ca/economy states the budget is "maintaining the small business tax rate at one per cent". The combined 10% adds the federal 9% small business rate to the Saskatchewan lower rate and is our arithmetic.For Manitoba: Manitoba Finance, Corporate Income Taxes - Province of Manitoba. Verified 2026-08-13. Budget 2026 (tabled March 24, 2026, Information Bulletin 126) announced no corporate income tax rate changes, so 0% holds for all of 2026. The combined 9% adds the federal 9% small business rate to the Manitoba lower rate and is our arithmetic.For New Brunswick: New Brunswick Income Tax Act, S.N.B. 2000, c. N-6.001 (official consolidation, laws.gnb.ca), corroborated by NB Department of Finance and Treasury Board corporate tax page, New Brunswick Income Tax Act (consolidated), s.57(1)(a) and s.57(1.025). Verified 2026-08-13. The combined 11.5% adds the federal 9% small business rate to the New Brunswick lower rate and is our arithmetic.For Nova Scotia: Nova Scotia Department of Finance and Treasury Board (novascotia.ca), Corporate income tax rates - Government of Nova Scotia. Verified 2026-08-13. The cut from 2.5% to 1.5% is applied on a days-prorated basis for taxation years straddling April 1, 2025 (NS Income Tax Act s. 40(2) formula, and CRA Schedule 346 Part 3 prorates 2.5% for days before April 1, 2025 and 1.5% after March 31, 2025). Budget 2026-27 (novascotia.ca/budget) keeps the rate at 1.5% - no 2026 change. The combined 10.5% adds the federal 9% small business rate to the Nova Scotia lower rate and is our arithmetic.For Prince Edward Island: PEI Department of Finance and Affordability, and the Income Tax Act, R.S.P.E.I. 1988, Cap. I-1, Provincial Corporate Income Taxes | Government of Prince Edward Island. Verified 2026-08-13. The 1% rate has applied since January 1, 2022 and was left unchanged by the July 1, 2025 package (which changed the general rate and threshold) and by Budget 2026. Statutory basis: Income Tax Act (PEI) s. 37.11.6 (years beginning on or after 2022-01-01 and ending before 2025-07-01) and s. 37.11.7 (years beginning on or after 2025-07-01), factor A = 1.0% in both. The combined 10% adds the federal 9% small business rate to the Prince Edward Island lower rate and is our arithmetic.For Newfoundland and Labrador: Income Tax Act, 2000, SNL 2000 c I-1.1, s. 40(3) (as amended by 2026 c14 s4), announced in Government of Newfoundland and Labrador Budget 2026, Income Tax Act, 2000 (consolidated), House of Assembly of Newfoundland and Labrador, and the Budget 2026 News Release. Verified 2026-08-13. Announced in Budget 2026 (tabled April 29, 2026) retroactive to January 1, 2026, and already enacted: the consolidated statute's s. 40(3) reads 2% with amendment citation 2026 c14 s4. Section 40(4) prorates straddle years by days: 2.5% for days before January 1, 2026 and 2% for days after December 31, 2025. Budget 2026 also announced further cuts to 1.5% on January 1, 2027 and 1% on January 1, 2028, but those steps are NOT yet in the consolidated statute (no 1.5%/1% text found). The Finance department's Corporate Income Tax web page still showed 2.5% when loaded on 2026-08-13 - that page lags the statute. The combined 11% adds the federal 9% small business rate to the Newfoundland and Labrador lower rate and is our arithmetic. For Ontario: Ontario Ministry of Finance, Corporations Tax: Corporate Income Tax (ontario.ca), confirmed in 2026 Ontario Budget - Annex. Verified 2026-08-13. The combined figure adds the federal 15% general rate (after the abatement and general rate reduction) and is our arithmetic.For British Columbia: Province of British Columbia (Ministry of Finance), Corporate income tax rates – Province of British Columbia. Verified 2026-08-13. 12% effective January 1, 2018. Budget 2026 announced no corporate rate changes. The combined figure adds the federal 15% general rate (after the abatement and general rate reduction) and is our arithmetic.For Alberta: Government of Alberta - Treasury Board and Finance / Tax and Revenue Administration, Tax, levy, and prescribed interest rates. Verified 2026-08-13. 8% effective July 1, 2020 (Job Creation Tax Cut endpoint). Alberta Budget 2026 (tabled 2026-02-26) made no change. The issuer rate table loaded 2026-08-13 shows 8% as current with nothing pending. The combined figure adds the federal 15% general rate (after the abatement and general rate reduction) and is our arithmetic.For Saskatchewan: The Income Tax Act, 2000, c I-2.01 (Saskatchewan), King's Printer consolidation, The Income Tax Act, 2000, s. 56(1) - Rates of tax. Verified 2026-08-13. No change in the 2026-27 budget (tabled March 18, 2026). The combined figure adds the federal 15% general rate (after the abatement and general rate reduction) and is our arithmetic.For Manitoba: Manitoba Finance, Corporate Income Taxes - Province of Manitoba. Verified 2026-08-13. Budget 2026 (March 24, 2026) made no change to the general rate. The combined figure adds the federal 15% general rate (after the abatement and general rate reduction) and is our arithmetic.For New Brunswick: New Brunswick Income Tax Act, S.N.B. 2000, c. N-6.001 (official consolidation, laws.gnb.ca), New Brunswick Income Tax Act (consolidated), s.56(4.32) and s.57(1.07). Verified 2026-08-13. The combined figure adds the federal 15% general rate (after the abatement and general rate reduction) and is our arithmetic.For Nova Scotia: Nova Scotia Department of Finance and Treasury Board (novascotia.ca), Corporate income tax rates - Government of Nova Scotia. Verified 2026-08-13. 14% since April 1, 2020 (was 16% before). Budget 2026-27 proposes no change to corporate income tax rates. The combined figure adds the federal 15% general rate (after the abatement and general rate reduction) and is our arithmetic.For Prince Edward Island: PEI Department of Finance and Affordability, and the Income Tax Act, R.S.P.E.I. 1988, Cap. I-1, s. 37(1), Provincial Corporate Income Taxes | Government of Prince Edward Island. Verified 2026-08-13. Reduced from 16% by the 2025-26 budget, effective July 1, 2025. Straddling taxation years are split into notional years at June 30/July 1, 2025 with income apportioned by days (Income Tax Act (PEI) s. 37.11.7(4)). CRA applies day-based proration for dual-rate years. Budget 2026 (tabled April 14, 2026) made no further change. The combined figure adds the federal 15% general rate (after the abatement and general rate reduction) and is our arithmetic.For Newfoundland and Labrador: Income Tax Act, 2000, SNL 2000 c I-1.1, s. 40(1), Income Tax Act, 2000 (consolidated), House of Assembly of Newfoundland and Labrador. Verified 2026-08-13. The combined figure adds the federal 15% general rate (after the abatement and general rate reduction) and is our arithmetic. ↩

  5. Innovation, Science and Economic Development Canada (Corporations Canada), “Services, fees and processing times”, verified 2026-08-23. Federal incorporation is $200 online and $250 by other means, with $12 a year for the annual return. Provincial incorporation fees vary by registry and are not stated here. We have put no figure on the annual accounting and bookkeeping cost, because no issuer publishes one. ↩

  6. Income Tax Act (Canada), section 125(7), definition of “personal services business”, with Canada Revenue Agency, “Determine if the worker’s corporation is carrying on a PSB”, verified 2026-08-23. The stake test is the specified-shareholder test, and it catches a person related to the incorporated employee as well as the employee. The five conditions include an exclusion where the corporation employs more than five full-time employees throughout the year, and another where the customer is an associated corporation. The employee-but-for-the-corporation condition is third on the CRA’s list. ↩

  7. Income Tax Act (Canada), section 123.5, which adds “an amount equal to 5% of the corporation’s taxable income for the year from a personal services business”, verified 2026-08-23. The 33% federal total is our arithmetic on the 28% and the 5%. ↩

  8. Income Tax Act (Canada), section 18(1)(p), with Canada Revenue Agency, “Understand your obligations as a corporation carrying on a PSB or the payer of a PSB”, verified 2026-08-23. The permitted deductions are the salary, wages or other remuneration paid in the year to the incorporated employee, the cost of benefits and allowances given to that person, certain selling and negotiating expenses, and legal costs of collecting amounts owed. ↩

  9. Canada Revenue Agency, “Fact sheet – Personal services business”, page updated April 13, 2026 and verified 2026-08-23. ↩

  10. Department of Finance Canada, Budget 2025 Tax Measures: Supplementary Information, with the Canada Revenue Agency news release of December 4, 2025, which describes the $77.0 million over four years starting in 2026-2027 as proposed. Both verified 2026-08-23. The CRA’s trucking compliance page, updated June 23, 2026, still described the funding as proposed at that date. ↩

  11. Income Tax Act (Canada), section 241(4)(d)(x.2), added by the Budget 2025 Implementation Act, No. 1, S.C. 2026, c. 3, which received Royal Assent on March 26, 2026. Verified 2026-08-23. The provision permits taxpayer information to be provided to an official of the Department of Employment and Social Development, solely for administering or enforcing the Canada Labour Code as it relates to the misclassification of employees. ↩

  12. Employment Insurance Act (Canada), section 5(2)(b), verified 2026-08-23, which excludes employment where the person controls more than 40% of the corporation’s voting shares. Both a sole proprietor and a controlling shareholder can opt into the Employment Insurance program for self-employed people. That program is joined in advance and pays special benefits (e.g. maternity, parental, sickness and compassionate care) rather than the regular benefits paid when work stops. ↩

  13. Employment and Social Development Canada, “Self-employed benefits – Who can qualify” (https://www.canada.ca/en/services/benefits/ei/ei-self-employed-workers/eligibility.html): owners controlling more than 40% of voting shares can opt into special benefits, with an agreement active for at least 12 months and other eligibility conditions. This does not provide regular unemployment benefits. Verified 2026-09-25. ↩

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