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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.

In this article, we talk about what can be earned in Canadian eligible or non-eligible dividends before regular federal or provincial taxes are payable, and before alternative minimum tax applies, if there is no income other than the eligible or non-eligible dividends.

Dividends eligible for the enhanced dividend tax credit

In 2016, regular federal taxes start to be payable when actual eligible dividends reach the amount of $55,699 (2015 $50,129).  AMT starts when the dividends reach $51,475 (2015 $53,496), and at this point there is $633 of federal tax payable.  The federal AMT is applicable for dividends above this amount, until the amount of the dividends reaches $132,400 (2014 $113,273), when the regular federal tax exceeds the minimum amount.

In the following table, the federal row 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 information 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 ($51,475), AMT will be payable for all provinces except Quebec, which does not base its AMT on the federal AMT.  The provincial information also shows the total amount of regular federal income tax, plus federal and provincial AMT payable at the indicated amount of dividends.

The 2016 tables are based on income tax rates as known on June 1, 2016.  Only NL and PE have changed since this was done for 2016 in February 2016.

 

Year

2016 2015 2014 2013

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 $55,699   $50,129   $49,289   $48,850  
AB(7) 35.00% 141,198 13,837 236,052 32,979 n/a   n/a  
BC(1)(4) 33.70% 120,173 10,482 116,121 9,841 115,322 9,897 118,479 10,617
MB(5) 50.00% 24,275 0 24,279 0 24,279 0 23,867 0
NB 57.00% 70,581 3,644 69,691 3,096 68,513 2,885 94,107 6,683
NL(4)(6) 51.30% 18,692 0 21,284 0 20,825 0 88,569 5,835
NS 57.50% 30,511 0 30,514 0 30,514 0 30,514 0
NT 45.00% 235,870 37,122 233,185 32,426 229,755 31,975 227,931 31,733
NU 45.00% 98,433 7,639 97,496 7,176 96,000 6,931 95,374 6,826
ON(2)(4) 33.67% 85,681 5,583 85,791 5,363 85,147 6,008 55,666 707
PE 57.50% 44,695 0 44,700 0 44,700 0 44,700 0
QC(3) n/a 35,843   35,449 0 35,080 0 34,742 0
SK 50.00% 93,904 7,029 92,700 6,488 91,157 6,230 90,350 6,095
YT(4)(5) 42.70% n/a   n/a   n/a   n/a  
 
Federal AMT starts at $51,475 $53,496 $54,475 $54,982

(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)  The BC, NL and ON AMT rates are calculated as lowest provincial tax rate / lowest federal tax rate.  The YT AMT rate was reduced for 2015/16 from 44% to 42.7%.
(5)  YT never has basic provincial tax on their eligible dividends when there is no other income (see below).  Provincial AMT will be payable in 2015 when Federal AMT kicks in, above $53,496 of eligible dividends.
(6) 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 for 2014 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 have been earned in 2014 before NL tax was payable.
(7) For 2014 and earlier years, due to the fact that Alberta's tax rate was 10%, and the enhanced dividend tax credit is 10% of taxable dividends, there was no basic provincial tax payable on those dividends.  This is why we have indicated "n/a" for Alberta above for 2014 and 2013.  New higher tax rates changed this for Alberta for 2015/16.  A similar situation occurs for Yukon Territory, because in 2015/16 their highest personal tax rate is 15%, and the enhanced dividend tax credit is 15% of taxable dividends.

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

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 gross-up and federal dividend tax credit rate for these dividends changed in 2014 and again in 2016.  See our article on non-eligible (small business) dividends for more information.

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 2016 are as known at August 30, 2016.  AB, NS and SK have been revised slightly since June 1, 2016.

Year Federal AB BC(1) MB NB(7) NL(6) NS(8) ON(2) PE(5) QC(3) SK(4)
2016 32,855 22,792 22,712 10,055 20,339 18,448 14,673 42,863 14,365 22,065 19,406
2015 36,160 22,377 22,718 9,968 19,910 18,705 14,791 43,807 13,558 21,641 19,188
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.  It was subsequently reduced further in 2014 and 2016.
(5) PE increased their dividend tax credit rate for 2013, from 5% to 14.5% of the gross-up, in conjunction with the increase in the small business corporate income tax rate.  It was subsequently increased to 21% for 2015 and later years.
(6) NL 2016 Budget reduced the non-eligible dividend tax credit rate from 4.1% to 3.5% of the taxable dividend (Jun 30/14 from 5% to 4.1%), effective for dividends received after June 30, 2016.  The dividends for 2016 in the table above are assumed to be received after June 30, 2016.  If they are received evenly throughout the year, $18,719 of actual dividends could be earned before NL tax is payable.
(7) NB rate reduced for 2015 and later years from 5.3% to 4% of taxable dividends.
(8) NS rate reduced for 2015 from 5.87% to 3.5% of taxable dividends, and to 3.33% for 2016.

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, in particular the Investment Income Tax Calculator.

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: August 30, 2016

 

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