Dividend Tax Calculator Ontario
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Dividend Tax Calculator for Ontario: Maximize Your Tax Savings
Dividends are a popular form of investment income, but they come with their own set of tax rules. In Ontario, understanding how dividend taxation works is crucial for investors looking to maximize their after-tax returns. This guide will help you navigate the complexities of dividend taxes and show you how a Dividend Tax Calculator can simplify the process.
Table of Contents
Understanding Dividend Taxation
In Canada, dividends are categorized into two types: eligible and non-eligible dividends. Each type is taxed differently and comes with its own gross-up rates and tax credits.
- Eligible Dividends: These are paid by Canadian corporations from income that has been taxed at the higher corporate rate.
- Non-Eligible Dividends: These come from income taxed at the lower small business rate.
The gross-up process increases the amount of dividends reported on your tax return to reflect pre-tax corporate earnings.
Tax Rates and Credits
Here’s a quick comparison of the federal and Ontario tax rates and credits for dividends in 2025:
| Combined Federal & Ontario Tax Brackets and Tax Rates Including Surtaxes | |||||||||
| 2025 Taxable Income (1) | ON 2025 Marginal Tax Rates | 2024 Taxable Income (1) | ON 2024 Marginal Tax Rates | ||||||
| Other Income | Capital Gains | Canadian Dividends | Other Income | Capital Gains | Canadian Dividends | ||||
| Eligible | Non-Eligible | Eligible | Non-Eligible | ||||||
| first $52,886 | 20.05% | 10.03% | -6.86% | 9.24% | first $51,446 | 20.05% | 10.03% | -6.86% | 9.24% |
| over $52,886 up to $57,375 | 24.15% | 12.08% | -1.20% | 13.95% | over $51,446 up to $55,867 | 24.15% | 12.08% | -1.20% | 13.95% |
| over $57,375 up to $93,132 | 29.65% | 14.83% | 6.39% | 20.28% | over $55,867 up to $90,599 | 29.65% | 14.83% | 6.39% | 20.28% |
| over $93,132 up to $105,775 | 31.48% | 15.74% | 8.92% | 22.38% | over $90,599 up to $102,894 | 31.48% | 15.74% | 8.92% | 22.38% |
| over $105,775 up to $109,727 | 33.89% | 16.95% | 12.24% | 25.16% | over $102,894 up to $106,732 | 33.89% | 16.95% | 12.24% | 25.16% |
| over $109,727 up to $114,750 | 37.91% | 18.95% | 17.79% | 29.78% | over $106,732 up to $111,733 | 37.91% | 18.95% | 17.79% | 29.78% |
| over $114,750 up to $150,000 | 43.41% | 21.70% | 25.38% | 36.10% | over $111,733 up to $150,000 | 43.41% | 21.70% | 25.38% | 36.10% |
| over $150,000 up to $177,882 | 44.97% | 22.48% | 27.53% | 37.90% | over $150,000 up to $173,205 | 44.97% | 22.48% | 27.53% | 37.90% |
| over $177,882 up to $220,000 | 48.29% | 24.14% | 32.11% | 41.72% | over $173,205 up to $220,000 | 48.29% | 24.14% | 32.11% | 41.72% |
| over $220,000 up to $253,414 | 49.85% | 24.92% | 34.26% | 43.51% | over $220,000 up to $246,752 | 49.85% | 24.92% | 34.26% | 43.51% |
| over $253,414 | 53.53% | 26.76% | 39.34% | 47.74% | over $246,752 | 53.53% | 26.76% | 39.34% | 47.74% |
| Marginal tax rate for dividends is a % of actual dividends received (not grossed-up taxable amount). Marginal tax rate for capital gains is a % of total capital gains (not taxable capital gains). Gross-up rate for eligible dividends is 38%, and for non-eligible dividends is 15%. The surtax is calculated before deducting dividend tax credits. | |||||||||
How to Calculate Your Dividend Tax
Gross-Up Calculation
- Eligible Dividends: Grossed-up by 38%:
Formula:Grossed-Up Amount = Dividend Amount × 1.38 - Non-Eligible Dividends: Grossed-up by 15%:
Formula:Grossed-Up Amount = Dividend Amount × 1.15
Taxable Income Calculation
The grossed-up amount is added to your total taxable income, which determines your overall tax bracket.
Applying Tax Credits
- Federal Tax Credit: Applied to offset the federal tax on the grossed-up amount.
- Ontario Tax Credit: Applied to reduce provincial tax.
Example Calculation
Let’s take an example of an eligible dividend of $1,000:
- Gross-Up Amount: $1,000 × 1.38 = $1,380
- Federal Tax Credit: $1,380 × 15.0198% = $207.27
- Ontario Tax Credit: $1,380 × 10% = $138.00
These credits help lower your total tax liability on the dividend income.
Reporting Dividends on Your Tax Return
When filing your tax return in Ontario, dividends should be reported on the following lines:
- Line 12000: Total dividend income
- Line 12100: Grossed-up amount
- Line 40425: Federal dividend tax credit
- Ontario Form ON479: Provincial dividend tax credit
Using a Dividend Tax Calculator is a smart way to ensure you’re calculating your taxes accurately and taking full advantage of available credits. By understanding the nuances of dividend taxation, you can optimize your investment returns and minimize your tax burden.
What are the best Canadian dividend stocks to buy?
Popular choices include major banks, utilities, and telecom companies like Royal Bank of Canada, Fortis Inc., and BCE Inc. Always research before investing.
How are foreign dividends taxed in Canada?
Foreign dividends are fully taxable as ordinary income, and foreign withholding taxes may apply. You may be eligible for a foreign tax credit.
Which province has the lowest taxes?
As of now, Alberta generally has the lowest personal income tax rates in Canada.
What is the Canadian dividend tax credit?
It’s a non-refundable credit that reduces the federal and provincial taxes owed on dividend income.
How much is $250,000 a year taxed in Canada?
At $250,000 annual income, you’ll be in a higher tax bracket, and the amount of tax depends on your mix of salary, dividends, and other income sources.
How much dividend is tax free?
Dividends up to the basic personal amount can be tax-free, depending on your total income and available credits.
Is it better to pay yourself a salary or dividends in Canada?
It depends on your situation. Salaries provide CPP contributions and consistent income, while dividends offer lower tax rates and no CPP contributions. A mix of both is often beneficial.
How much tax will I pay on dividends in Ontario?
The tax you pay on dividends depends on whether they are eligible or non-eligible dividends, your income level, and the applicable federal and provincial tax credits.
How is tax calculated on dividend income?
Tax is calculated by grossing up the dividend amount, adding it to your taxable income, and then applying federal and provincial tax credits to reduce your total tax payable.
How much income tax do I pay on $100,000 in Ontario?
Income tax on $100,000 in Ontario depends on your sources of income, including salary, dividends, and other taxable income. Dividends receive preferential tax treatment compared to salary income.
Are dividends taxed at 30%?
No, dividends are not taxed at a flat 30%. Eligible dividends benefit from lower effective tax rates due to gross-up and tax credits, while non-eligible dividends have a higher effective tax rate but still benefit from some credits.
How to avoid tax on dividend income?
One strategy is to invest through Tax-Free Savings Accounts (TFSA) or Registered Retirement Savings Plans (RRSP), where dividend income is either tax-free or tax-deferred.