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Tax Comparison Seniors Investment Income 2018

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Personal Tax  -> Dividend tax credits -> 
Tax Rates  -> Tax Comparisons  ->  Tax comparison for seniors with investment income -> 2018

2018 Seniors Tax Comparison: Canadian Dividends vs Other Investment Income

The table on this page compares taxes payable by province in 2018 for two different types of income:

bulletCanadian dividends eligible for the enhanced dividend tax credit, and
bulletother income, such as interest and foreign dividends.

To the above income we add:

bullet$7,121 of OAS - this is the annual max for 2018
bullet$8,300 of CPP retirement income
bullet$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 July 25, 2019.

Notes:
     - The clawback of OAS reduces taxable income, and is included in taxes payable.
     - BC taxes payable include MSP premiums payable for 2019 based on 2018 income.
     - Ontario - includes Ontario Health Premium.
     - QC includes health contribution, contribution to the health services fund, and prescription drug insurance plan premiums.
     - QC dividends are assumed to be earned after March 27, 2018.

Income
Type
Annual
Amount
OAS $7,121
CPP 8,300
Eligible Pension Income 24,000
Total before investment income   $39,421

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

Income
Type
Annual Income
Case A
Dividends
Case B
Interest
Income from above 39,421 39,421
Eligible Dividends 30,000 nil
Interest Income nil 30,000
Total Income 69,421 69,421
Gross-up 11,400 nil
OAS Clawback -737 nil
Taxable Income 80,084 69,421
 

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

Province/
Territory
2018 Taxes Payable Case B
Increase
in Taxes
Increase
as % of A
Case A
Dividends
Case B
Interest
AB 8,003 14,058 6,055 76%
BC 7,044 13,398 6,354 90%
MB 11,852 16,364 4,512 38%
NB 9,033 16,304 7,271 80%
NL 13,204 16,631 3,427 26%
NS 12,169 17,067 4,898 40%
NT 5,265 12,070 6,805 129%
NU 6,208 10,735 4,527 73%
ON 7,819 13,807 5,988 77%
PE 11,068 16,690 5,622 51%
QC 12,881 18,088 5,207 40%
SK 8,796 15,073 6,277 71%
YT 6,252 13,222 6,970 111%

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

Case C
Dividends
Case D
Interest
Income from above 39,421 39,421
Eligible Dividends 50,000 nil
Interest Income nil 50,000
Total Income 89,421 89,421
Gross-up 19,000 nil
OAS Clawback -4,877 -2,027
Taxable Income 103,544 87,394

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
Case C
Dividends
Case D
Interest
AB 13,090 22,010 8,920 68%
BC 12,471 21,088 8,617 69%
MB 19,228 25,573 6,345 33%
NB 14,491 25,118 10,627 73%
NL 21,114 25,823 4,709 22%
NS 19,225 26,188 6,963 36%
NT 10,731 19,935 9,204 86%
NU 12,266 18,182 5,916 48%
ON 14,115 21,935 7,820 55%
PE 17,589 25,772 8,183 47%
QC 20,474 27,347 6,873 34%
SK 14,195 23,401 9,206 65%
YT 11,673 21,078 9,405 81%

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.

Revised: July 25, 2019

 

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