2017 Seniors Tax Comparison: Canadian Dividends vs Other Investment Income

The table on this page compares taxes payable by province in 2017 for two different types of income:

Canadian eligible dividends, and
other income, such as interest and foreign dividends.

To the above income we add:

$6,942 of OAS - this is the annual max for 2017 based on Jan to Jun 2017 rates
$8,221 of CPP retirement income
$24,000 of pension income that is eligible for the pension income tax credit

The calculations assume that the income is received by a single senior. The tax rates used are as known on June 14, 2017.

Notes:

The clawback of OAS reduces taxable income, and is included in taxes payable.
BC taxes payable include MSP premiums payable for 2018 based on 2017 income.
Ontario - includes Ontario Health Premium.
QC includes health contribution, contribution to the health services fund, and prescription drug insurance plan premiums.

Income Type	Annual Amount
OAS	$6,942
CPP	8,221
Eligible Pension Income	24,000
Total before investment income	$39,164

The first comparison uses $30,000 of eligible dividends compared to $30,000 of other income.

Income Type	Annual Income
Income Type	Case A Dividends	Case B Interest
Income from above	39,164	39,164
Eligible Dividends	30,000	nil
Interest Income	nil	30,000
Total Income	69,164	69,164
Gross-up	11,400	nil
OAS Clawback	-866	nil
Taxable Income	79,697	69,164

The following table compares the taxes payable on the above incomes - the taxes payable include any applicable OAS clawback.

Province/ Territory	2017 Taxes Payable		Case B Increase in Taxes	Increase as % of A
Province/ Territory	Case A Dividends	Case B Interest	Case B Increase in Taxes	Increase as % of A
AB	8,122	14,099	5,977	74%
BC	7,660	13,892	6,231	81%
MB	11,975	16,410	4,435	37%
NB	9,155	16,346	7,190	79%
NL	13,381	16,736	3,354	25%
NS	12,237	17,101	4,863	40%
NT	5,403	12,120	6,717	124%
NU	6,349	10,786	4,436	70%
ON	7,976	13,867	5,891	74%
PE	11,235	16,778	5,543	49%
QC	13,256	18,401	5,145	39%
SK	9,138	15,201	6,063	66%
YT	6,305	13,271	6,966	110%

You can see above that in a couple of the territories, more than double the income tax is payable with interest instead of eligible dividends.

The next comparison uses $50,000 of eligible dividends compared to $50,000 of other income.

Income Type	Annual Income
Income Type	Case C Dividends	Case D Interest
Income from above	39,164	39,164
Eligible Dividends	50,000	nil
Interest Income	nil	50,000
Total Income	89,164	89,164
Gross-up	19,000	nil
OAS Clawback	-5,006	-2,156
Taxable Income	103,158	87,008

The following table compares the taxes payable on the above incomes - the taxes payable include any applicable OAS clawback.

Province/ Territory	Taxes Payable		Case D Increase in Taxes	Increase as % of C
Province/ Territory	Case C Dividends	Case D Interest	Case D Increase in Taxes	Increase as % of C
AB	13,245	22,110	8,865	67%
BC	13,149	21,659	8,511	65%
MB	19,386	25,481	6,095	31%
NB	14,663	25,235	10,572	72%
NL	21,335	25,989	4,654	22%
NS	19,327	26,237	6,910	36%
NT	10,900	20,076	9,176	84%
NU	12,455	18,048	5,593	45%
ON	14,384	22,099	7,715	54%
PE	17,792	25,919	8,127	46%
QC	20,881	27,735	6,854	33%
SK	14,700	22,327	7,628	52%
YT	11,842	21,186	9,344	79%

Although the higher taxable income with Canadian eligible dividends causes a clawback of the OAS and a higher clawback of the age credit, the taxes payable are still significantly lower.

To see the tax results for your own income situation, and how it would change if the type of investment income changes, use our Detailed Income Tax and RRSP Savings Calculators, and our very simple Investment Income Tax Calculator. However, the Investment Income Tax Calculator does not include BC MSP in the total taxes, because MSP is not actually part of the income tax system. In the detailed Canadian Income Tax and RRSP Savings Calculator, the BC MSP is shown at the bottom of the calculator, but not included in the total taxes payable.

See also Tax Comparisons by Province and Territory, which compare different levels of employment income for people who are not seniors.

Tax Tip: Although Canadian dividends increase the OAS clawback, the net tax payable is still much less than with interest or foreign dividends.