🇨🇦 Canada Dividend Tax Guide
Complete guide to dividend taxation in Canada. Eligible Dividends: Receive preferred tax treatment (Gross-up + Credit).
In 60 Seconds
- •Eligible Dividends: Receive preferred tax treatment (Gross-up + Credit)
- •Gross-up: Income is artificially increased by 38% for tax calculation
- •Tax Credit: Federal credit of 15.02% offsets tax payable
- •Non-Eligible Dividends: Taxed at higher rates (small private corps)
How Dividend Tax Works
Canada integrates corporate and personal tax to prevent double taxation. For "Eligible Dividends" (most public stocks), you "gross up" the income to reflect pre-tax corporate earnings, calculate tax, and then claim a substantial Dividend Tax Credit to reduce what you owe.
Key Considerations
Example: Real World Scenario
Scenario
Received $1,000 eligible dividend.
Canadian Dividend Strategy
Prioritize TFSA
Maximize your Tax-Free Savings Account (TFSA) first. Canadian dividends inside strictly incur zero tax and require no reporting.
RRSP for US Stocks
Hold US dividend stocks in an RRSP. The Canada-US treaty prevents the 15% US withholding tax. (Note: TFSA does NOT have this treaty benefit).
Non-Registered Accounts
If registered accounts are full, hold Canadian eligible dividend stocks here to leverage the Dividend Tax Credit.
