Question 1

What is the dividend gross-up in Canada?

Accepted Answer

Eligible dividends are grossed up by 38% to reflect corporate tax already paid. Non-eligible dividends, usually from small businesses (CCPCs), are grossed up by 15%. The gross-up increases your taxable income, and the dividend tax credit offsets it.

Question 2

What is the difference between eligible and non-eligible dividends?

Accepted Answer

Eligible dividends usually come from large Canadian corporations taxed at the general corporate rate. They get a 38% gross-up and a federal dividend tax credit of 15.02% of the grossed-up amount. Non-eligible dividends come from CCPCs taxed at the small business rate. They get a 15% gross-up and a federal credit of 9.03%.

Question 3

How much tax do I pay on Canadian dividends?

Accepted Answer

The effective tax rate on dividends depends on your province and income. Eligible dividends are taxed lightly at low incomes — sometimes below zero, when the credit exceeds the tax — and non-eligible dividends are taxed more heavily at every income level. Enter your numbers in the calculator to see your rate.

Dividend Tax Credit

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