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:

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

To the above income we add:

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

	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	$7,421
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
Income Type	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
Province/ Territory	Case A Dividends	Case B Interest	Case B Increase in Taxes	Increase as % of A
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
Income Type	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
Province/ Territory	Case C Dividends	Case D Interest	Case D Increase in Taxes	Increase as % of C
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: October 26, 2023