Calculate Canadian dividend tax rates including eligible and non-eligible dividends with provincial breakdowns.
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Canadian dividends are payments made by corporations to their shareholders from after-tax profits. The Canadian tax system provides dividend tax credits to prevent double taxation, making dividends more tax-efficient than other forms of investment income.
Tax rates range from 8.51% (Yukon) to 16.67% (Nova Scotia) across provinces
Tax rates range from 23.51% (Yukon) to 31.67% (Nova Scotia) across provinces
| Feature | Eligible | Non-Eligible |
|---|---|---|
| Source | Large Canadian corporations | Small businesses (CCPC) |
| Gross-up Factor | 38% | 15% |
| Tax Credit | Higher (15% federal) | Lower (10% federal) |
| Effective Tax Rate | Lower | Higher |
| Examples | Banks, utilities, telecoms | Small cap stocks |
Hold dividend stocks in TFSA for completely tax-free dividend income. Perfect for Canadian dividend stocks.
Hold dividend stocks in RRSP for tax-deferred growth. Dividends grow tax-free until withdrawal.
Use dividend tax credits to reduce overall tax burden. Focus on eligible dividends for better tax treatment.
Eligible dividends come from large Canadian corporations and receive a higher dividend tax credit (38% gross-up, 15% federal credit). Non-eligible dividends come from small businesses (CCPC) and receive a lower credit (15% gross-up, 10% federal credit).
Dividend tax credits prevent double taxation by giving you credit for corporate taxes already paid. The gross-up factor increases your taxable income, but the tax credit reduces your actual tax payable, resulting in a lower effective tax rate on dividends.
Yukon has the lowest rates: 8.51% for eligible and 23.51% for non-eligible dividends. Alberta and Northwest Territories also have relatively low rates. Nova Scotia has the highest rates.
TFSA is generally better for dividend stocks because dividends are completely tax-free. RRSP dividends are tax-deferred but will be taxed as income upon withdrawal. Consider your current vs. expected retirement tax rate.
The corporation will indicate this on your T5 slip. Generally, dividends from large Canadian corporations (banks, utilities, telecoms) are eligible, while dividends from small businesses (CCPC) are non-eligible.
The gross-up factor (38% for eligible, 15% for non-eligible) increases your taxable income to account for corporate taxes already paid. This ensures the tax system works fairly regardless of whether income comes from dividends or salary.
No, dividend tax credits only apply to Canadian dividends. Foreign dividends are taxed as regular income without any special credits. Consider holding foreign dividend stocks in TFSA or RRSP for tax advantages.
Dividend tax rates are updated annually and can change based on federal and provincial budget decisions. Rates generally increase with income levels and vary significantly by province. Always check current rates for tax planning.
All Canadian bank dividends are eligible, providing the best tax treatment with dividend tax credits.
Utilities provide stable, regulated income with consistent dividend growth and eligible dividend treatment.
Telecoms offer high dividend yields with potential for capital appreciation and eligible dividend treatment.
Many investors don't realize that eligible dividends have much better tax treatment than non-eligible dividends. Always check your T5 slip to confirm the dividend type and plan accordingly.
Foreign dividends don't qualify for Canadian dividend tax credits and are taxed as regular income. Consider holding foreign dividend stocks in TFSA or RRSP for better tax treatment.
Canadian dividend stocks are perfect for TFSA because dividends are completely tax-free. Don't waste TFSA space on low-yield investments when you can hold high-yield dividend stocks.
Dividend tax rates vary significantly by province. If you're considering relocating, factor in the tax implications of different provinces on your dividend income.
Keep detailed records of all dividend income and ensure you're reporting it correctly on your tax return. Mistakes can lead to penalties and interest charges from the CRA.
Dividend tax credits can significantly reduce your overall tax burden. Factor these credits into your tax planning and consider the impact on your marginal tax rate.
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