Updated Checked by the Tax-Services.ca editorial team How we check
Yes, dividends from Canadian corporations are taxable income. But they’re taxed in a roundabout way, and the outcome can be a low bill or none at all. On $5,000 of eligible dividends, an Ontario resident with $100,000 of other income pays about $308 extra tax, or 6.2%. The same $5,000 in other dividends costs about $1,085.
How is dividend income taxable in Canada?
You add more than you received. The CRA tells you to multiply eligible dividends by 138% and other than eligible dividends by 115% when you have no slip, and that bigger figure goes on your return (lines 12000 and 12010). Then you claim a dividend tax credit that shrinks the tax again. Federally the credit is 6/11 of the gross-up for eligible dividends and 9/13 for other dividends, per the CRA’s income tax folio.
Multiply the actual amount received by 138% and include the result on line 12000
Lines 12000 and 12010, Canada Revenue Agency, canada.ca
Provinces add their own credit. The Ontario credit rates for 2026 aren’t on a CRA page we could read, so treat the Ontario figures below as estimates from our calculator.
What is the difference between eligible and other dividends?
A corporation has to designate a dividend as eligible. Anything not designated counts as other than eligible. The CRA says eligible dividends carry a lower combined personal tax rate because the company paid tax at the full corporate rate, while other dividends often come from income that got a small business break at the corporate level.
Your slip tells you which you got. You don’t have to work it out.
| Ontario, $5,000 received | Taxable after gross-up | Credits | Extra tax |
|---|---|---|---|
| Eligible, $100,000 other income | $6,900 | $1,726.37 | $307.75 |
| Other, $100,000 other income | $5,750 | $690.94 | $1,084.81 |
| Eligible, $45,000 other income | $6,900 | $1,726.37 | None, and $261.92 off other tax |
| Other, $45,000 other income | $5,750 | $690.94 | $554.43 |
Can dividends really cost nothing?
Look at the third row. With $45,000 of other income, $5,000 of eligible dividends adds no tax in the calculator, and the credits even cut the tax on your other income by $261.92. That’s not cash from the government. The credits only reduce tax you’d have owed anyway, and they can’t take the bill below zero.
So the answer changes with your income. A retiree with a small pension gets a very different result from a salaried person at $100,000. And someone with almost no other income may see no tax at all on modest dividends.
Picture Raj in Kitchener, who holds a few bank shares in a non-registered account and wonders why his tax slip says $6,900 when his deposits only added up to $5,000. Nothing odd has happened. That’s just the gross-up at work, and the credit gives most of it back.
Where do the amounts come from on your return?
Dividends show up on a T5 for investment income, on a T3 if they come through a trust such as a fund, and on a T4PS or T5013 in rarer cases. The T5 spells out the taxable amount with the gross-up and the credit. Copy those, don’t calculate them yourself, unless a slip is missing.
Foreign dividends aren’t covered by the CRA page we used, so check before you assume the rules above apply.
What if you never got a slip?
You still report the dividends. The multipliers above exist for exactly that case, and the CRA page says to use the slip amounts when you do have one. If a broker or a small company paid you a few bucks and no slip turned up, work from your statements, note which kind of dividend it was, and keep that paperwork. Leaving tiny amounts off at tax time is the sort of thing that comes back as a reassessment letter later.
Mistakes to avoid
Entering the grossed-up figure as the amount you received is the classic one. The calculator wants the cash you got and applies the gross-up itself. Another is ignoring the knock-on effects: higher net income can reduce income-tested benefits, and we haven’t modelled those.
Finally, don’t assume dividends bring no tax at every income. At $100,000 the eligible example above still costs $307.75.
What to try next
Put your own figures into the dividend tax calculator and split eligible from other dividends. For your whole return, use the income tax calculator. If you sell shares instead, the capital gains tax calculator applies. The marginal tax rate calculator shows what an extra dollar of each kind of income costs.
How we checked the figures
The gross-up percentages come from the CRA’s lines 12000 and 12010 page, quoted above and read in October 2026. The federal credit fractions come from its income tax folio on taxable dividends. The dollar examples come from our own calculator on 2026 rates. We’re an independent site, and no government body is behind it.
Frequently asked questions
Is dividend income taxable in Canada?
Yes. Dividends from taxable Canadian corporations are reported on your return, grossed up, and then reduced by a dividend tax credit.
What is the gross-up on dividends?
The CRA gives 138% of the amount received for eligible dividends and 115% for other than eligible dividends, when you have no slip.
Where do I report dividends?
On lines 12000 and 12010 of your return, using the T5, T3, T4PS or T5013 slip you were sent.
Why do eligible dividends cost less tax?
The gross-up is bigger, but so is the credit. The CRA says eligible dividends come from income taxed at full corporate rates.
Do foreign dividends work the same way?
Not necessarily. The CRA page we used covers dividends from taxable Canadian corporations only, so check the rules for foreign dividends.
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