Canada Dividend Tax Calculator 2026
Tax on eligible and non-eligible dividends in every province for 2026 after the gross-up and dividend tax credits, the marginal rate on the next dividend versus interest, after-tax income and the effect on OAS and benefit income tests.
| Grossed-up (taxable) dividends | — |
|---|---|
| Tax at marginal rates before credits | — |
| Federal dividend tax credit | — |
| Provincial dividend tax credit | — |
| Net tax on the dividends | — |
| Effective rate on the cash dividend | — |
| Marginal rate on the next $1 of eligible / non-eligible dividend | — |
| Same money as interest / salary | — |
| After-tax dividend income | — |
| OAS / benefit income effect | — |
In short
Canadian eligible dividends are grossed up by 38% and non-eligible by 15%, then credited at 15.02% / 9.03% federally plus a provincial credit (10% / 2.99% in Ontario), so $10,000 of eligible dividends on top of $70,000 of Ontario income costs about $900 of tax versus $3,115 for the same interest; top marginal rates in Ontario are 39.34% on eligible dividends against 53.53% on interest.
Who this is for: Investors holding Canadian dividend stocks in taxable accounts, retirees planning income, and owner-managers weighing salary against dividends.
Dividend tax in Canada: gross-up, credit and why dividends beat interest
Canadian dividends are taxed through a gross-up and credit that approximates the corporate tax already paid. Eligible dividends (from public companies and large CCPCs taxed at the general rate) are grossed up by 38% and earn a federal credit of 15.02% of the grossed-up amount plus a provincial credit (10% in Ontario, 12% in BC, 8.12% in Alberta); non-eligible dividends (small-business income) are grossed up 15% with credits of 9.03% federal plus 0.7–6% provincial. The result: at $70,000 of other income in Ontario, $10,000 of eligible dividends costs about $900 of tax versus $3,115 for the same interest.
- Top marginal rates 2026 (Ontario): 39.34% on eligible dividends, 47.74% on non-eligible, 53.53% on interest and salary, 26.76% on capital gains.
- Negative rates: below roughly $50,000 of income the credits on eligible dividends exceed the tax on them in most provinces — the excess offsets tax on other income but is not refunded.
- Income tests use the grossed-up figure: $10,000 of eligible dividends adds $13,800 to net income for the OAS clawback, CCB and age credit.
- Foreign dividends (US, international ETFs) get no credit and are taxed like interest, less a foreign tax credit for withholding; hold them in an RRSP where the US treaty exempts withholding.
- Owner-managers compare salary (RRSP room, CPP) with non-eligible dividends (no CPP, lower tax at the corporate level) each year.
See also: Canada Income Tax Calculator 2026 — All Provinces.
Assumptions
- Grossed-up dividends (×1.38 eligible, ×1.15 non-eligible) stacked on other income; tax = bracket tax on the increment less federal (15.02% / 9.03%) and provincial credits on the grossed-up amount; Ontario surtax and Health Premium increments and the Quebec abatement applied.
- Credits cannot reduce federal or provincial tax below zero on the dividend layer (non-refundable).
- Comparison taxes the same cash as ordinary income; foreign dividends taxed in full with no credit.
Worked example
Grossed-up dividend $13,800 → taxable income $83,800. Tax on the extra $13,800 at 20.5% federal + 9.15% Ontario = $4,092; less the federal credit 15.02% × 13,800 = $2,073 and Ontario credit 10% × 13,800 = $1,380 → federal tax $756, Ontario tax nil (the credit exceeds it), plus a $150 Ontario Health Premium step → net tax about $906 (9.1% of the cash dividend). The same $10,000 as interest costs $3,115. Marginal rate on the next eligible dividend here is about 7.6% versus 29.65% on interest.
Frequently asked questions
How are dividends taxed in Canada?
Canadian dividends are grossed up (38% eligible, 15% non-eligible), added to income and taxed at your marginal rate, then a dividend tax credit (15.02% / 9.03% federal plus a provincial credit) is deducted — so the effective rate is far below the rate on interest at every income level.
What is the difference between eligible and non-eligible dividends?
Eligible dividends come from income taxed at the general corporate rate (public companies, large private companies) and get the bigger gross-up and credit; non-eligible dividends come from small-business income taxed at the low rate and get a smaller credit, so they are taxed more heavily in your hands.
Are dividends tax-free up to $50,000 in Canada?
Roughly — a person with no other income can receive about $50,000–$55,000 of eligible dividends in most provinces and pay little or no federal tax because the credits exceed the tax, though provincial tax, the Ontario Health Premium and CPP/OAS tests still apply.
Do dividends affect OAS?
Yes, and more than interest does: the grossed-up amount counts as net income for the clawback, so $10,000 of eligible dividends is treated as $13,800.
How are US dividends taxed in Canada?
As ordinary income at full marginal rates with no gross-up or credit; the 15% US withholding tax is claimable as a foreign tax credit, and is waived entirely inside an RRSP/RRIF (but not a TFSA).
Should I pay myself salary or dividends from my corporation?
Salary creates RRSP room and CPP entitlement and is deductible to the corporation; non-eligible dividends avoid CPP and payroll but are taxed higher personally — integration makes the totals similar, so the choice is about RRSP room, CPP and cash-flow needs.
What is the capital dividend?
A tax-free dividend a private corporation can pay from its capital dividend account (the untaxed half of its capital gains and life-insurance proceeds) — not grossed up and not taxed to the shareholder.
Do REIT and ETF distributions get the dividend tax credit?
Only the portion classified as eligible Canadian dividends on the T3/T5; return of capital, interest, foreign income and capital gains are each taxed under their own rules.
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