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Tax Comparison Seniors Investment Income 2021 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 -> 2021

2021 Seniors Tax Comparison: Canadian Dividends vs Other Investment Income

The table on this page compares taxes payable by province in 2021 for two different types of income:

bulletCanadian eligible dividends, and
bulletother income, such as interest and foreign dividends.

To the above income we add:

bullet$7,421 of OAS - this is the annual maximum for 2021, based on Apr-Jun 2021 rates
bullet$8,479 of CPP retirement income - average for new beneficiaries Mar 2021
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 22, 2021.

Notes:

bullet The clawback of OAS reduces taxable income, and is included in taxes payable.
bullet Ontario - includes Ontario Health Premium.
bullet QC includes health contribution, contribution to the health services fund, and prescription drug insurance plan premiums.

 

Income
Type
Annual
Amount
OAS $7,421
CPP 8,479
Eligible Pension Income 24,000
Total before investment income   $39,900

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 39,900 39,900
Eligible Dividends 30,000 nil
Interest Income nil 30,000
Total Income 69,900 69,900
Gross-up 11,400 nil
OAS Clawback -218 nil
Taxable Income 81,082 69,900

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

Province/
Territory
2021 Taxes Payable Case B
Increase
in Taxes
Increase
as % of A
Case A
Dividends
Case B
Interest
AB 8,007 13,613 5,606 70%
BC 5,347 12,460 7,113 133%
MB 10,915 15,876 4,961 45%
NB 8,104 15,658 7,554 93%
NL 11,807 15,760 3,953 33%
NS 11,510 16,726 5,216 45%
NT 4,405 11,549 7,145 162%
NU 4,934 9,923 4,989 101%
ON 6,914 13,285 6,371 92%
PE 10,279 16,214 5,936 58%
QC 12,177 17,636 5,458 45%
SK 8,069 14,681 6,612 82%
YT 5,347 12,611 7,265 136%

You can see above that in BC and 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 39,900 39,900
Eligible Dividends 50,000 nil
Interest Income nil 50,000
Total Income 89,900 89,900
Gross-up 19,000 nil
OAS Clawback -4,358 -1,508
Taxable Income 104,542 88,392

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 13,481 21,271 7,790 58%
BC 10,716 19,713 8,997 84%
MB 18,158 24,670 6,512 36%
NB 13,373 24,167 10,794 81%
NL 19,392 24,369 4,967 26%
NS 18,443 25,564 7,121 39%
NT 9,774 19,018 9,245 95%
NU 10,785 16,941 6,156 57%
ON 12,851 21,028 8,176 64%
PE 16,668 25,018 8,350 50%
QC 19,579 26,555 6,976 36%
SK 13,334 22,708 9,373 70%
YT 10,716 20,168 9,452 88%

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: July 22, 2021

 

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