Tax Rates -> Enhanced dividend tax credit
Enhanced Dividend Tax Credit
Income Tax Act s. 82(1)(b)(ii)(D), 121(b)(iv)
Note: The gross-up and dividend tax credit are applicable to individuals, not corporations.
There is an enhanced dividend tax credit for eligible Canadian dividends received by individuals after 2005 from:
A portion of dividends paid by public corporations will sometimes be not eligible for the enhanced dividend tax credit.
With the enhanced dividend tax credit, a "gross-up" is added to the actual dividend to determine the taxable dividend amount for an individual to include in income. The tax credit is calculated as a portion of the gross-up. See the tables below for gross-up and Federal tax credit percentages.
See the tables of enhanced dividend tax credit rates for the provincial and territorial rates.
In keeping with the previously announced reductions to the federal corporate income tax rates, the 2008 Federal Budget reduced the gross-up on dividends eligible for the enhanced dividend tax credit, and reduced the dividend tax credit rate, beginning in the 2010 tax year. The dividend tax credit factor of 11/18ths of the gross-up was changed to
What did this do to the marginal tax rates for eligible dividends?
In 2016 the tax rate for the 2nd tax bracket was reduced, and a new top tax bracket was introduced for over $200,000 of taxable income. This reduced the marginal tax rate for the 2nd bracket from 9.63% to 7.56%, and created a new marginal tax rate of 24.81% for the highest bracket. The tax bracket thresholds are indexed each year. For all marginal tax rates and thresholds for the current year, federally and for each province and territory, see the Tables of Marginal Tax Rates.
See also our article which shows the maximum amount of dividends that can be received before any tax is payable.
Revised: September 20, 2017
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