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Dividend Tax Calculator

2025
Dividend Details
$

From income taxed at general corporate rate

$

Affects marginal rate on dividend income

Tax Summary

Total Dividend Tax

$12,578.71

Net Dividend

$37,421.29

Effective Rate on Dividend

25.16%

Step-by-Step Calculation

Step 1: Gross-Up

Actual Dividend Received$50,000.00
Gross-Up (38%)+$19,000.00
Grossed-Up (Taxable) Amount$69,000.00

Step 2: Federal Tax

Federal Tax on Dividend Portion$14,802.53
Federal DTC (15.0198%)-$10,363.66
Net Federal Tax$4,438.86

Step 3: Provincial Tax

Provincial Tax on Dividend (Ontario)$8,139.85
Total Dividend Tax$12,578.71
Net Dividend After Tax$37,421.29
Effective Tax Rate25.16%
More Information
Frequently Asked Questions
Eligible dividends are paid from corporate income that was taxed at the general rate (15% federal). They receive a 38% gross-up and a larger dividend tax credit (15.0198% of the grossed-up amount). Non-eligible dividends are paid from income taxed at the small business rate (9% federal). They receive a 15% gross-up and a smaller dividend tax credit (9.0301% of the grossed-up amount). The system is designed so that the combined corporate + personal tax on dividends approximates the tax that would be paid if the income were earned directly.
The gross-up is a notional amount added to the actual dividend to approximate the pre-tax corporate income that generated the dividend. For eligible dividends, the 38% gross-up implies the dividend came from income taxed at ~28% federal. For non-eligible dividends, the 15% gross-up implies income taxed at ~13% combined. You pay tax on the grossed-up amount (as if you earned the pre-tax corporate income directly), then receive the dividend tax credit to offset the corporate tax already paid.
The dividend tax credit is a non-refundable tax credit that reduces the personal tax payable on dividends received from Canadian corporations. It exists because the corporation has already paid tax on the income before distributing it as dividends. The federal DTC is 15.0198% of the grossed-up amount for eligible dividends and 9.0301% for non-eligible dividends. Each province also has its own DTC rates that reduce provincial tax. The combined effect of the gross-up and DTC aims to achieve integration.
Yes, in some circumstances. If your only income is dividends and the grossed-up amount falls within your basic personal amount, the tax calculated would be zero or negative (but the DTC is non-refundable, so you cannot get a refund). In Ontario, for example, an individual with no other income can receive approximately $50,000-$60,000 in eligible dividends with minimal or no tax payable, due to the combination of the basic personal amount credit and the dividend tax credit.
When you have other income (salary, interest, etc.), dividends are stacked on top. The grossed-up dividend is added to your other income, pushing you into potentially higher tax brackets. The DTC then offsets some of this additional tax. The effective tax rate on dividends increases as your other income increases because the dividend income is taxed at higher marginal rates while the DTC remains the same percentage. At top marginal rates, eligible dividends are taxed at approximately 39% (Ontario) vs non-eligible at approximately 47%.
Integration means that the total tax paid on corporate income distributed as dividends should equal the tax that would have been paid if the income were earned directly by an individual. The formula is: Corporate tax + Personal tax on dividend = Personal tax on employment income. In practice, perfect integration rarely occurs due to varying provincial rates and the complexity of the system. Small imperfections create either "overintegration" (dividend route is cheaper) or "underintegration" (salary route is cheaper).
Dividends from foreign corporations do not qualify for the Canadian dividend tax credit. They are taxed as ordinary income at your full marginal rate. Foreign taxes withheld may be eligible for a foreign tax credit on your Canadian return. This makes foreign dividends significantly more expensive from a tax perspective than Canadian dividends. US dividends are typically subject to a 15% withholding tax under the Canada-US tax treaty, which can be claimed as a foreign tax credit.

CRA-Aligned: Uses 2025 federal dividend gross-up rates and tax credit rates. Provincial dividend tax credits vary and are approximated using bracket calculations. This calculator provides the federal DTC only; provincial DTCs provide additional relief. Consult a tax professional for exact figures.

Understanding Dividend Tax in Canada

How the gross-up and dividend tax credit system works

How are dividends taxed in Canada?

Canada uses a gross-up and dividend tax credit system to reduce the double taxation of corporate profits. When a corporation pays you a dividend, you gross up the amount (add a percentage), include the grossed-up amount in your income, then claim a dividend tax credit to offset some of the tax. The end result is that dividends are taxed at a lower effective rate than regular income.

What is the difference between eligible and non-eligible dividends?

Eligible dividends come from corporations that paid tax at the general rate (15% federal). They receive a 38% gross-up and a larger tax credit. Non-eligible dividends come from income taxed at the small business rate (9% federal). They receive a 15% gross-up and a smaller tax credit. Non-eligible dividends are taxed at a higher personal rate.

What does the gross-up mean in practice?

If you receive $10,000 in eligible dividends, you gross it up by 38% and report $13,800 as taxable income. You then claim a federal dividend tax credit of about $2,072 (15.02% of $13,800). For $10,000 in non-eligible dividends, you report $11,500 (15% gross-up) and claim a credit of about $1,044 (9.03% of $11,500).

Can you receive dividends tax-free?

Yes, if your only income is dividends. Because of the dividend tax credit, a Canadian with no other income can receive roughly $50,000 to $60,000 in eligible dividends and pay zero federal tax, depending on their province. However, this only works if you have no other sources of income — the gross-up can push you into higher brackets.

How do provincial dividend tax credits work?

Each province has its own dividend tax credit rate in addition to the federal credit. Provincial rates vary, which means the total tax on dividends differs by province. In provinces with generous credits like Alberta, the combined effective rate on eligible dividends can be as low as 15%. In provinces with less generous credits, it can be closer to 30%.

Should you pay yourself dividends or salary from your corporation?

This depends on your situation. Salary reduces corporate income and is a deductible expense, creates RRSP contribution room, and counts as earned income for CPP. Dividends do not create RRSP room or CPP contributions but may result in lower combined tax. Many business owners use a mix of salary and dividends to optimise their overall tax position.

What about dividends from foreign companies?

Foreign dividends (such as from US stocks) do not qualify for the Canadian dividend tax credit. They are taxed as regular income at your full marginal rate. Foreign withholding tax may be deducted at source — for example, the US withholds 15% on dividends paid to Canadian residents. You can claim a foreign tax credit on your Canadian return to avoid double taxation.

CRA-Aligned: Based on 2025 CRA rates and thresholds. For personal advice, speak to a qualified accountant or tax professional.

Disclaimer: This calculator provides estimates based on current CRA rates and thresholds for the 2025 tax year. It does not constitute professional tax, financial, or legal advice. Your actual liability may differ depending on your individual circumstances. Always consult a qualified accountant before making financial decisions. Read our terms

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