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Tax Comparison Seniors Investment Income 2020 TaxTips.ca
Canadian Tax and
Financial Information

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Personal Tax  -> Dividend tax credits -> 
Tax Rates  -> Tax Comparisons  ->  Tax comparison for seniors with investment income -> 2020

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:

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$7,362 of OAS - this is the annual max for 2020, based on Apr-Jun 2020 rates
bullet$8,822 of CPP retirement income - average for new beneficiaries Jan 2020
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 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
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
Case A
Dividends
Case B
Interest
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

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
Case C
Dividends
Case D
Interest
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.

Revised: April 26, 2020

 

 

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