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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.

Dividends eligible for the enhanced dividend tax credit

In 2013, regular federal taxes start to be payable when actual eligible dividends reach the amount of $48,850.  AMT starts when the dividends reach $54,982, and at this point there is $592 of federal tax payable.  The federal AMT is applicable for dividends above this amount, until the amount of the dividends reaches $106,825, 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 ($54,982 in 2013), AMT will be payable for all provinces except Québec, 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.

Federal AMT was payable at $56,097 of actual dividends in 2012, $50,530 in 2011.

The 2013 and 2012 tables are based on income tax rates as known on June 11, 2013

2013

Federal

AB(6) BC(1) MB NB NL

NS

NT NU ON(2) PE

QC(3)

SK

YT(6)

Actual eligible dividends

$48,850 n/a $117,479 $23,867 $94,107 $88,569 $30,510 $227,931 $95,374 $55,666 $44,700 $34,742 $90,382 n/a
Total fed. taxes + prov. AMT 0   10,617 0 6,683 5,835 0 31,733 6,826 707 0 0 6,101  
Provincial AMT as % of Federal AMT (4) 35% 33.7% 50% 57% 51.3% 57.5% 45% 45% 33.67% 57.5% n/a 50% 44%

 

2012

Federal

AB(6) BC(1) MB(5) NB NL

NS

NT NU ON(2) PE

QC(3)

SK

YT(6)

Actual eligible dividends

$47,892 n/a $117,685 $23,454 $144,046 $86,316 $30,514 $223,989 $93,989 $56,088 $44,700 $33,901 $88,588 n/a
Total fed. taxes + prov. AMT 0   10,704 0 15,789 5,465 0 31,213 6,593 790 0 0 5,801  
Provincial AMT as % of Federal AMT (4) 35% 33.7% 50% 57% 51.3% 57.5% 45% 45% 33.67% 57.5% n/a 50% 44%

 

2011

Federal

AB BC(1) MB NB NL

NS

NT NU ON(2) PE

QC(3)

SK

YT

Actual eligible dividends

$50,530 n/a $120,448 $51,263 $137,134 $81,917 $29,864 $213,958 $95,416 $51,800 $43,749 $32,313 $84,326 n/a
Total fed. taxes + prov. AMT 0   10,766 166 13,203 5,464 0 26,231 7,410 256 0 0 5,824  
Provincial AMT as % of Federal AMT (4) 35% 33.7% 50% 57% 51.3% 57.5% 45% 45% 33.67% 57.5% n/a 50% 44%

(1)  BC excludes Medical Services Plan Premiums, BC 2012 budget increased 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.
(6)  AB and YT never have basic provincial tax on their eligible dividends.  Provincial AMT will be payable in 2013 when Federal AMT kicks in, above $54,982 of eligible dividends.

See our tables of enhanced dividend tax credit rates.

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 following table for Canadian non-eligible (small business) dividends shows the amount of actual dividends that can be earned in 2011 to 2013 before any regular income tax is incurred, when there is no income other than the dividends.  Alternative minimum tax is not incurred at any level of these dividends.  Tax rates for 2013 and 2012 are as known at June 11, 2013.

Small Business Dividends

Federal

AB BC(1) MB NB NL

NS

ON(2) PE(5)

QC(3)

SK(4)

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
(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.

See our tables of rates for non-eligible (small business) dividends.

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 any possibility you may be subject to alternative minimum tax.

 

Revised: November 20, 2013

 

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