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Dividend Tax Credit Estimate
Gross-up
Eligible dividends × 1.38
Non-eligible dividends × 1.15
Federal dividend tax credit
Eligible (15.02% of grossed-up)
Non-eligible (9.03% of grossed-up)
Tax impact
Tax on other income alone
Tax with dividends, before credit
Extra tax after federal DTC
Effective rate on dividends received
Frequently asked questions
What's the difference between eligible and non-eligible dividends?
Eligible dividends generally come from income taxed at the general corporate rate (public companies, or CCPC income above the small business limit) and get a larger credit. Non-eligible dividends come from small business rate income and get a smaller credit.
Why are dividends grossed up before being taxed?
The gross-up approximates the corporation's pre-tax income, so the dividend tax credit can then offset the corporate tax already paid — this is Canada's system for avoiding double taxation on the same profit.
Does this include the provincial dividend tax credit?
No — only the federal credit (15.02% eligible / 9.03% non-eligible) is applied here. Provincial dividend tax credit rates and rules vary by province, so your real combined tax will usually be somewhat lower than this estimate.