2020 Seniors Tax Comparison: Canadian Dividends vs Other Investment Income

The table on this page compares taxes payable by province in 2020 for two different types of income:

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

To the above income we add:

$7,362 of OAS - this is the annual max for 2020, based on Apr-Jun 2020 rates
$8,822 of CPP retirement income - average for new beneficiaries Jan 2020
$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 April 18, 2020.

Notes:

The clawback of OAS reduces taxable income, and is included in taxes payable.
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	$7,362
CPP	8,822
Eligible Pension Income	24,000
Total before investment income	$40,184

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	40,184	40,184
Eligible Dividends	30,000	nil
Interest Income	nil	30,000
Total Income	70,184	70,184
Gross-up	11,400	nil
OAS Clawback	-380	nil
Taxable Income	81,205	70,184

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

Province/ Territory	2020 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	7,564	13,844	6,280	83%
BC	5,669	12,669	7,029	124%
MB	11,310	16,128	4,818	43%
NB	8,568	16,035	7,467	87%
NL	12,165	16,019	3,854	32%
NS	11,853	16,974	5,121	43%
NT	4,755	11,803	7,047	148%
NU	5,292	10,163	4,871	92%
ON	7,284	13,537	6,253	86%
PE	10,671	16,509	5,838	55%
QC	12,526	17,886	5,360	43%
SK	8,434	14,942	6,508	77%
YT	5,745	12,956	7,210	125%

You can see above that in BC and 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	40,184	40,184
Eligible Dividends	50,000	nil
Interest Income	nil	50,000
Total Income	90,184	90,184
Gross-up	19,000	nil
OAS Clawback	-4,520	-1,670
Taxable Income	104,665	88,515

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	12,557	21,606	9,049	72%
BC	11,076	20,092	9,015	81%
MB	18,591	25,065	6,474	35%
NB	13,891	24,647	10,756	77%
NL	19,788	24,727	4,939	25%
NS	18,825	25,907	7,083	38%
NT	10,134	19,396	9,262	91%
NU	11,204	17,300	6,096	54%
ON	13,322	21,398	8,076	61%
PE	17,097	25,410	8,312	49%
QC	20,009	26,903	6,894	34%
SK	13,738	23,073	9,335	68%
YT	11,076	20,621	9,545	86%

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.

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.