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Alternative Minimum Tax re Eligible Dividends

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Personal Tax -> Dividend tax credits -> 
                         -> Tax Rates -> Alternative minimum tax / maximum Canadian dividends with no regular taxes payable
Income Tax Act s. 127.5

Alternative minimum tax (AMT) as it relates to Canadian dividends

Our Canadian tax calculator calculates alternative minimum tax as it relates to Canadian dividends.

Dividends eligible for the enhanced dividend tax credit

In 2014, regular federal taxes start to be payable when actual eligible dividends reach the amount of $49,289.  AMT starts when the dividends reach $54,475, and at this point there is $500 of federal tax payable.  The federal AMT is applicable for dividends above this amount, until the amount of the dividends reaches $109,042, when the regular federal tax exceeds the minimum amount.

In the following table, the federal column for eligible dividends shows the amount of actual dividends that can be earned before regular federal tax is payable, if there is no income other than the dividends.  The provincial columns show the amount of actual dividends that can be earned in each province before any regular provincial income tax (net of any low income tax reduction) is payable.  However, if this amount exceeds the amount of dividends at which federal AMT is payable ($54,475 in 2014), AMT will be payable for all provinces except Quebec, which does not base its AMT on the federal AMT.  The provincial columns also show the total amount of regular federal income tax, plus federal and provincial AMT payable at the indicated amount of dividends.

The 2014 tables are based on income tax rates as known on August 25, 2014.

 

Year

2014   2013   2012   2011

Province

Prov AMT as % of Fed AMT

Actual
Dividends
Fed Taxes + Prov AMT Actual
Dividends
Fed Taxes + Prov AMT Actual
Dividends
Fed Taxes + Prov AMT Actual
Dividends
Fed Taxes + Prov AMT
Federal $49,289 0 $48,850 0 $47,892 0 $50,530 0
AB(6) 35.00% n/a   n/a   n/a   n/a  
BC(1)(4) 33.70% 115,322 9,897 118,479 10,617 117,685 10,704 120,448 10,766
MB(5) 50.00% 24,279 0 23,867 0 23,454 0 51,263 166
NB 57.00% 68,513 2,885 94,107 6,683 144,046 15,789 137,134 13,203
NL(4)(7) 51.30% 20,825 0 88,569 5,835 86,316 5,465 81,917 5,464
NS 57.50% 30,514 0 30,514 0 30,514 0 29,864 0
NT 45.00% 229,755 31,975 227,931 31,733 223,989 31,213 213,958 26,231
NU 45.00% 96,000 6,931 95,374 6,826 93,989 6,593 95,416 7,410
ON(2)(4) 33.67% 85,147 6,008 55,666 707 56,088 790 51,800 256
PE 57.50% 44,700 0 44,700 0 44,700 0 43,749 0
QC(3) n/a 35,080 0 34,742 0 33,901 0 32,313 0
SK 50.00% 91,157 6,230 90,350 6,095 88,588 5,801 84,326 5,824
YT(6) 44.00% n/a   n/a   n/a   n/a  
 
Federal AMT starts at $54,475   $54,982   $56,097   $50,530

(1)  BC excludes Medical Services Plan Premiums.  BC 2012 budget revised the dividend tax credit on eligible dividends.
(2)
  ON excludes Ontario Health Premium.
(3)  QC excludes contribution to the health services fund, health contribution, and prescription drug insurance plan premiums.
(4)  The BC, NL and ON AMT rates are calculated as lowest provincial tax rate / lowest federal tax rate.
(5)  The MB 2012 budget reduced the dividend tax credit rate.
(6)  AB and YT never have basic provincial tax on their eligible dividends when there is no other income.  Provincial AMT will be payable in 2014 when Federal AMT kicks in, above $54,475 of eligible dividends.
(7) The NL 2014 budget reduced the dividend tax credit rate from 11% of the taxable dividend to 5.4%, effective for dividends received after June 30, 2014.The dividends in the table above are assumed to be received after June 30, 2014.  If they are received evenly throughout the year, $38,839 of actual dividends could be earned before NL tax is payable.

See our tables of enhanced dividend tax credit rates by year from 2007 to present for every province & territory.

Due to the fact that Alberta's tax rate is 10%, and the enhanced dividend tax credit is 10% of taxable dividends, there is no basic provincial tax payable on those dividends.  This is why we have indicated "n/a" for Alberta above.  A similar situation occurs for Yukon Territory, because their highest personal tax rate is 12.76%, and the enhanced dividend tax credit is 15.08% of taxable dividends.

Provincial AMT is calculated as a % of federal AMT, except for Quebec.  Thus, even though the eligible dividends may not reach the taxable level in a particular province, they will still be subject to AMT if there is federal AMT.  Quebec's AMT is not based on the federal AMT, and Canadian dividends, eligible or non-eligible (small business) do not incur AMT in Quebec.

The above table only relates to AMT regarding eligible Canadian dividends.  AMT may be applicable in other situations when taxpayers have high incomes, yet have little tax payable on the income.  The exemption level for federal AMT is $40,000.

For more information on alternative minimum tax, see the Canada Revenue Agency information on Minimum Tax web page.  The AMT is calculated on form T691.

Non-eligible dividends

The 2013 Federal Budget reduced the gross-up for non-eligible dividends from 25% to 18%, and reduced the federal non-eligible dividend tax credit from 13 1/3% to 11.017% of the taxable dividend, both effective for 2014 and later years.

In the following table, the federal column for non-eligible dividends shows the amount of actual dividends that can be earned before regular federal tax is payable, if there is no income other than the dividends.  The provincial columns show the amount of actual dividends that can be earned in each province before any regular provincial income tax (net of any low income tax reduction) is payable.  Alternative minimum tax is not incurred at any level of these dividends.  Tax rates for 2014 are as known at August 25, 2014.

Year

Federal

AB BC(1) MB NB NL(6)

NS

ON(2) PE(5)

QC(3)

SK(4)

2014

35,551 21,848 21,628 9,968 23,014 18,333 21,666 42,946 12,825 21,410 18,866

2013

43,432 21,653 25,059 9,998 21,910 19,281 28,339 40,141 11,657 22,390 19,160

2012

42,584 21,276 27,711 9,805 21,875 18,807 28,339 39,425 9,140 21,850 18,789

2011

41,420 20,900 27,062 9,603 21,417 18,241 28,339 38,164 9,140 21,284 21,324

(1)  BC excludes Medical Services Plan Premiums
(2)
  ON excludes Ontario Health Premium.  ON rate for 2014 and later years as per ON November 7, 2013 Economic Outlook.  See ON dividend tax credit article.
(3)
  QC excludes contribution to the health services fund, health contribution, and prescription drug insurance plan premiums.
(4) SK reduced their dividend tax credit rate for 2012, in conjunction with the reduction in the small business corporate income tax rate.
(5) PE increased their dividend tax credit rate for 2013, from 5% to 14%% of the gross-up, in conjunction with the increase in the small business corporate income tax rate.
(6) NL 2014 Budget reduced the non-eligible dividend tax credit rate from 5% to 4.1% of taxable dividends, effective for dividends received after June 30, 2014.  The dividends in the table above are assumed to be received after June 30, 2014.  If they are received evenly throughout the year, $20,741 of actual dividends could be earned before NL tax is payable.

See our tables of rates for non-eligible (small business) dividends, which shows the dividend tax rates for 2007 to present for each province and territory.

To see the tax results for your own income situation, and how it would change if the type of investment income changes, use our Income Tax Planning Calculators.

Tax Tip:  Everyone's situation differs.  Seek the advice of a professional tax advisor if you think there is a possibility you may be subject to alternative minimum tax.

 

Revised: September 24, 2014

 

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