Dividend Tax Calculator
Calculate the tax on Canadian dividends, including the gross-up, federal and provincial dividend tax credits, and your effective dividend tax rate.
Dividend Details
Dividend Tax Summary
Effective Rate on Dividend
7.1%
Marginal Dividend Rate
6.4%
How it works: Canadian dividends are "grossed up" to reflect pre-tax corporate income, then you receive a Dividend Tax Credit (DTC) to offset the tax. Eligible dividends (from public corporations) get a 38% gross-up and a larger DTC, resulting in lower effective tax rates. Non-eligible dividends (from CCPCs) get a 15% gross-up and a smaller DTC. At low income levels, the DTC can exceed the tax on the dividend, resulting in zero net tax.
Dividend Tax in Canada
Canada uses a gross-up and tax credit mechanism for dividends. The dividend is "grossed up" to approximate the corporation's pre-tax income, then a Dividend Tax Credit (DTC) is applied to account for taxes already paid at the corporate level.
Eligible dividends: Paid by public corporations and large CCPCs from income taxed at the general corporate rate. They receive a 38% gross-up and a larger DTC, resulting in a lower effective tax rate for the shareholder.
Non-eligible dividends: Paid from income taxed at the small business rate. They receive a 15% gross-up and a smaller DTC, resulting in a higher effective tax rate.
Low-income advantage: At low income levels, the dividend tax credit can exceed the tax on the grossed-up dividend, resulting in zero net tax on dividend income.
Quebec: Quebec residents file a separate provincial return with Revenu Québec and pay federal tax on a different basis (the federal tax is reduced by a Quebec Abatement of 16.5%), which is not modelled in this calculator's federal tax figures.
Frequently asked questions
What is the difference between eligible and non-eligible dividends in Canada?
Eligible dividends are paid by public corporations and large CCPCs from income taxed at the general corporate rate. They receive a 38% gross-up and a larger dividend tax credit, resulting in lower tax. Non-eligible dividends are paid from income taxed at the small business rate, receive a 15% gross-up, and carry a smaller tax credit.
How does the dividend gross-up and tax credit work?
The dividend is 'grossed up' to approximate the corporation's pre-tax income, then a Dividend Tax Credit (DTC) is applied to account for corporate taxes already paid. This integration mechanism ensures dividend income is not double-taxed at both the corporate and personal level.
Can I earn dividends tax-free in Canada?
Yes, at low income levels the dividend tax credit can exceed the tax on the grossed-up dividend, resulting in zero net tax. You can also earn dividends completely tax-free inside a TFSA or defer tax by holding them in an RRSP.
Sources
Last updated April 2026. Reflects 2026 tax year rates.
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