TaxTips.ca
Canadian Tax and
Financial Information
Enhanced Dividend Tax Credit

TaxTips.ca does not research or endorse any product   or service appearing in ads on this site.  Before making a major financial decision you  should consult a qualified professional.

Looking for US tax information?
See
USTaxTips.net

Need an accounting, tax or financial advisor? Look in our Business Directory.     Stay Connected with TaxTips.ca!  Internet Explorer - Use compatibility view for calculators to work properly!

Home
What's New
Calculators
Personal Tax
Business
Sales Taxes
Free in 30!
Financial Planning
RRSP RRIF TFSA
Real Estate
Stocks Bonds etc.
Seniors
Disabilities
Canada
Alberta
British Columbia
Manitoba
Ontario
Quebec
Saskatchewan
Atlantic Provinces
Territories
Federal Budget
Provincial Budgets
Statistics etc.
Glossary
Site Map
Business Directory
Advertise With Us
Contact Us/About Us
Links & Resources


Personal Tax -> Dividend tax credits -> Enhanced dividend tax credit
Tax Rates

Enhanced Dividend Tax Credit

There is an enhanced dividend tax credit for eligible Canadian dividends received after 2005 from:

bullet public corporations resident in Canada
bullet other corporations resident in Canada that are not Canadian-controlled private corporations (CCPCs) and are subject to the general corporate tax rate
bullet CCPCs resident in Canada to the extent that their income (other than investment income, which is eligible for a special refundable tax) is subject to tax at the general corporate tax rate

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 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.

Changes to the enhanced dividend tax credit

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
bullet 10/17 for 2010
bullet 13/23 for 2011
bullet 6/11 for 2012 and later years

 

Federal Dividend Tax Credit (DTC)

 
2008/09 2010 2011 2012+
Gross-up 45% 44% 41% 38%
DTC as % of grossed-up dividends 18.9655% 17.98% 16.44% 15.02%
DTC as % of actual dividends 27.5% 25.88% 23.17% 20.73%

What does this do to the marginal tax rates for eligible dividends?

Federal Marginal Tax Rates on Dividends Eligible for the Enhanced Dividend Tax Credit

Taxable Income
2010 Tax Brackets

Other
Income
Tax Rate

Eligible Dividends Marginal Tax Rates

2009 2010 2011 2012+
First $40,970 15% -5.75% -4.28% -2.02% -0.03%
over $40,970 up to $81,941 22% 4.40% 5.80% 7.85% 9.63%
over $81,941 up to $127,021 26% 10.20% 11.56% 13.49% 15.15%
over $127,021 29% 14.55% 15.88% 17.72% 19.29%
 

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: December 19, 2013

 

Copyright © 2002 - 2014 Boat Harbour Investments Ltd. All Rights Reserved  See Reproduction of information from TaxTips.ca

Facebook | Twitter | Google + | Monthly Newsletter Sign-up | What’s New E-mail Notification | RSS News Feed
The information on this site is not intended to be a substitute for professional advice.  Each person's situation differs, and a professional advisor can assist you in using the information on this web site to your best advantage.  See our Business Directory for tax, accounting and finance-related firms in your area.
Please see our legal disclaimer regarding the use of information on our site, and our Privacy Policy regarding information that may be collected from visitors to our site.