-> Tax Rates -> Alternative minimum tax / maximum Canadian dividends with no regular taxes payable
- 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.
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.
(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.
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.
(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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