Dividend Tax Credit

by Tax Guy - Burlington Accountant on February 1, 2010 Print This Post Print This Post

The dividend tax credit is a non-refundable tax credit that may be deducted from personal taxes. The dividend is grossed up and this grossed up amount is included in taxable income as follows:

  • 45% for eligible dividends (145% is included in taxable income), and
  • 25% (125% is included in taxable income) for all other dividends.

The corresponding tax credits are equal to 11/18th of the grossed up amount of the eligible dividends (45%) and 2/3 of the grossed up amount for all other dividends (25%). For example eligible dividends:

  • Taxable amount of the dividend = Dividends x 145%
  • Tax credit received = 45% x 11/18
  • The tax credit is equivalent to 27.5% of the dividend received or 18.966% of the taxable amount of the dividend.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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