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Alternative Mininum Tax re Canadian Dividends

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Personal Tax -> Dividend tax credits -> 
      -> Tax Rates -> Alternative minimum tax / maximum Canadian dividends with no regular taxes payable

Canadian Dividends No Tax

 - Until the Alternative Minimum Tax (AMT) kicks in.

Income Tax Act s. 127.5

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.  The results shown are for a single person.

Eligible Dividends

In 2019, regular federal taxes start to be payable when actual eligible dividends reach the amount of $58,574 (2018 $57,316), and at this point there is $1,317 (2018 $1,115) of AMT payable.  AMT starts when the dividends reach $52,070 (2018 $51,811).  The federal AMT is applicable for dividends above this amount, until the amount of the dividends reaches $146,486 (2018 $140,345), 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 for a single person with only the basic personal amount tax credit, 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 ($52,070 in 2019), 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 2018/19 amounts are based on income tax rates known as of August 9, 2019.  2017 amounts were rechecked at this time - none of the dividend levels were revised.

Actual Eligible Dividends Before Regular Income Tax is Payable
 
2019 2018 2017 2016

Province

Prov AMT as
% of Fed AMT

Actual
Dividends
Fed Tax +
AMT
Actual
Dividends
Fed Tax +
AMT
Actual
Dividends
Fed Tax +
AMT
Actual
Dividends
Fed Tax +
AMT
Federal $58,574   $57,316   $56,478   $55,697  
AB 35.00% 148,224 14,498 144,740 14,128 143,013 14,000 141,192 13,835
BC (1)(4)(6) 33.70% 174,151 20,698 119,815 10,498 122,331 10,805 120,173 10,482
MB 50.00% 25,588 0 24,935 0 24,642 0 24,275 0
NB 57.00% 118,941 10,705 116,379 10,272 114,658 9,981 102,529 8,389
NL (4) 51.30% 18,495 0 18,168 0 17,452 0 18,692 0
NS 57.50% 32,408 0 32,408 0 30,511 0 30,511 0
NT (6) 45.00% 219,942 32,060 215,207 31,370 212,018 30,903 209,097 30,479
NU (6) 45.00% 79,292 4,866 75,659 4,286 74,535 4,093 73,517 3,918
ON (2)(4) 33.67% 93,174 7,818 91,165 6,718 86,893 5,775 85,681 5,583
PE 57.50% 47,134 0 47,134 0 45,668 0 45,324 0
QC (3) n/a 39,503   39,215   39,083   35,843  
SK 50.00% 107,166 9,109 107,166 9,016 94,498 7,146 93,904 7,029
YT (5)(6) 42.70% 428,622 83,839 425,153 83,463 n/a   n/a  
 
Federal AMT starts at $52,070 $51,811 $51,637 $51,475

Notes:

(1)  BC excludes Medical Services Plan Premiums.   BC's dividend tax credit rate was increased from 10% to 12% for 2019.

(2)  ON excludes Ontario Health Premium.

(3)  QC excludes contribution to the health services fund, health contribution, and prescription drug insurance plan premiums.  Tax credit rate was reduced for 2018. It is assumed that all 2018 dividends were received after the March 27, 2018 change in tax credit rate.

(4)  The BC, NL and ON AMT rates are calculated as lowest provincial tax rate / lowest federal tax rate.

(5)  In 2016/17, YT had no basic provincial tax on any level of eligible dividends when there was no other income, because their highest personal tax rate is 15%, and the enhanced dividend tax credit was 15% of taxable dividends.

(6) Refundable tax credits are excluded.

See our tables of enhanced dividend tax credit rates for eligible dividends 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 provincial 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 (Regular 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 2019/18 are as known at August 9, 2019.

Actual Non-Eligible Dividend Income Before Regular Income Taxes Are Payable
Year Gross-up Federal AB BC(1) MB NB NL NS ON(2) PE QC(3) SK
2019 15% 26,373 21,541 22,726 9,994 19,026 20,205 16,582 38,244 15,125 21,078 20,552
2018 16% 30,737 20,801 22,340 9,701 18,652 19,676 16,702 37,105 15,197 22,264 20,293
2017 17% 33,313 20,456 22,082 9,525 18,972 18,740 14,673 43,566 14,548 24,016 19,996
2016 17% 32,855 22,792 22,712 9,410 19,495 18,634 14,673 42,863 14,365 22,065 19,517
2015 18% 36,160 22,377 22,718 9,968 19,910 18,705 14,791 43,807 13,558 21,641 19,188
2014 18% 35,551 21,848 21,628 9,968 23,014 18,333 21,666 42,946 12,825 21,410 18,866
2013 25% 43,432 21,653 25,059 9,998 21,910 19,281 28,339 40,141 11,657 22,390 19,160
2012 25% 42,584 21,276 27,711 9,805 21,875 18,807 28,339 39,425 9,140 21,850 18,789
2011 25% 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.   Refundable tax credits are excluded.

(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.  QC 2017 has been revised because the previous amount was calculated before the changes in tax rate and tax credit rate announced Nov 21/17. Tax credit rate was reduced for 2018. It is assumed that all 2018 dividends were received after the March 27, 2018 change in tax credit rate.

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 18, 2019

 

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