K.M. FORSTER & CO.
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Articles > Seniors Tax Comparison: Canadian Dividends vs Other Investment Income 2016


31 Jul 2017

The table on this page compares taxes payable by province in 2016 for two different types of income:

bullet

Canadian dividends eligible for the enhanced dividend tax credit, and

bullet

other income, such as interest and foreign dividends.

To the above income we add:

bullet

$6,846 of OAS - this is the annual max for 2016 based on Jan to Jun 2016 rates

bullet

$7,975 of CPP retirement income - this is the average for 2016

bullet

$24,000 of pension income that is eligible for the pension income tax credit

The calculations assume that the income is received by a single senior. The tax rates used are as known on June 14, 2016.

Notes:
     - The clawback of OAS reduces taxable income, and is included in taxes payable.
     - BC taxes payable include MSP premiums payable for 2017 based on 2016 income.
     - Ontario - includes Ontario Health Premium.
     - QC includes health contribution, contribution to the health services fund, and prescription drug insurance plan premiums.

Income
Type

Annual
Amount

OAS

$6,846

CPP

7,975

Eligible Pension Income

24,000

Total before investment income  

$38,821

The first comparison uses $30,000 of eligible dividends compared to $30,000 of other income.

Income
Type

Annual Income

Case A
Dividends

Case B
Interest

Income from above

38,821

38,821

Eligible Dividends

30,000

nil

Interest Income

nil

30,000

Total Income

68,821

68,821

Gross-up

11,400

nil

OAS Clawback

-970

nil

Taxable Income

79,251

68,821

 

The following table compares the taxes payable on the above incomes.

Province/
Territory

Taxes Payable

Increase
in Taxes

Increase
as % of A

Case A
Dividends

Case B
Interest

AB

8,190

14,107

5,917

72%

BC

7,803

13,936

6,132

79%

MB

12,055

16,428

4,373

36%

NB

10,047

16,345

6,298

63%

NL

12,583

16,092

3,509

28%

NS

12,251

17,051

4,801

39%

NT

5,485

12,132

6,647

121%

NU

6,437

10,801

4,364

68%

ON

8,074

13,886

5,812

72%

PE

11,263

16,744

5,481

49%

QC

13,498

18,429

4,931

37%

SK

9,256

15,329

6,074

66%

YT

6,392

13,282

6,890

108%

You can see above that in a couple of the territories, more than double the income tax is payable with interest instead of eligible dividends.

The next comparison uses $50,000 of eligible dividends compared to $50,000 of other income.

Income
Type

Annual Income

Case C
Dividends

Case D
Interest

Income from above

38,821

38,821

Eligible Dividends

50,000

nil

Interest Income

nil

50,000

Total Income

88,821

88,821

Gross-up

19,000

nil

OAS Clawback

-5,110

-2,260

Taxable Income

102,711

86,561

 

The following table compares the taxes payable on the above incomes.

Province/
Territory

Taxes Payable

Increase
in Taxes

Increase
as % of A

Case C
Dividends

Case D
Interest

AB

13,342

22,162

8,819

66%

BC

13,340

21,812

8,471

64%

MB

19,496

25,740

6,244

32%

NB

16,147

25,294

9,146

57%

NL

     20,172

25,033

4,861

24%

NS

     19,365

26,234

6,869

35%

NT

     11,017

20,162

9,145

83%

NU

     12,580

18,378

5,798

46%

ON

     14,567

22,200

7,633

52%

PE

     17,850

25,932

8,082

45%

QC

21,154

27,970

6,816

32%

SK

14,836

23,861

9,025

61%

YT

11,959

21,244

9,285

78%

Although the higher taxable income with Canadian eligible dividends causes a clawback of the OAS and a higher clawback of the age credit, the taxes payable are still significantly lower.

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