Updated Checked by the Tax-Services.ca editorial team How we check
Dividend tax in Canada works by grossing the dividend up before you’re taxed, then giving you a credit back. Take $10,000 of eligible dividends with $60,000 of other income in Ontario: our calculator shows about $789 of extra tax, or 7.9%. The same $10,000 as other-than-eligible dividends costs $2,028.
How is dividend tax calculated in Canada?
The CRA has you report a bigger number than the cheque you received. For eligible dividends you multiply what you got by 138%. For dividends other than eligible, it’s 115%. So a $10,000 eligible dividend goes on your return as $13,800, and a $10,000 other dividend as $11,500.
Then a dividend tax credit comes off your tax. There’s a federal credit, and each province has its own. The CRA’s page on the federal dividend tax credit says it applies to dividends from taxable Canadian corporations, which is why foreign dividends don’t qualify and are taxed more like ordinary income.
The credit is why the table further down shows such a low rate at a $60,000 income. Picture Dana in Ottawa, who gets a $10,000 eligible dividend from shares she holds. She reports $13,800, pays tax on that at her normal rates, and then claims the credit, which gives most of it back.
What is the difference between eligible and other dividends?
Which type you got is printed on your slip. Our calculator’s help text says eligible dividends usually come from public companies and the other kind often from a private company. The slip decides, and you don’t choose. On a T5, the taxable amount for other dividends sits in box 11 and for eligible in box 25. Both flow to line 12000 of your return, and the other-than-eligible amount also goes on line 12010.
| Eligible | Other than eligible | |
|---|---|---|
| Gross-up | 38% | 15% |
| Amount on return for $10,000 received | $13,800 | $11,500 |
| Line on the T1 | 12000 | 12000 and 12010 |
| Federal credit line | 40425 | 40425 |
The exact federal credit percentages aren’t printed on the CRA page above, which sends you to the amounts on your slips or the worksheet for line 40425. Our calculator uses 15.0198% of the grossed-up eligible amount and 9.0301% of the other, figures quoted in excerpts of the CRA’s material. On the $10,000 examples that works out to a federal credit of about $2,073 for the eligible dividend ($13,800 times 15.0198%) and about $1,038 for the other ($11,500 times 9.0301%). The provincial credits are separate again.
How much tax will you pay on $10,000 of dividends?
Your other income moves the answer more than anything else. Here’s what the dividend tax calculator gives for $10,000 received in 2026.
| Situation | Extra tax, eligible | Extra tax, other |
|---|---|---|
| Ontario, $60,000 other income | $789 (7.9%) | $2,028 (20.3%) |
| Ontario, $120,000 other income | $1,765 (17.6%) | $3,418 (34.2%) |
| Alberta, $60,000 other income | $980 (9.8%) | $2,183 (21.8%) |
| Ontario, no other income | $0 | $0 |
Look at the second row. Doubling your other income roughly doubles the tax on the same dividend. And the gap between the two dividend types is over $1,600 on $10,000 in that row, which is the reason people ask about it.
The last row needs a caveat. With no other income the credits wipe out the tax on the dividend, but a real return has other effects that this estimate doesn’t model. The tool’s own note says extra tax is measured against the same year without the dividends.
What about dividends in a TFSA or RRSP?
Dividends paid on shares held inside a TFSA aren’t reported on your return, so there’s no gross-up and no credit to worry about. In an RRSP nothing is taxed while it stays in, and withdrawals later are taxed as ordinary income, with no dividend credit. That’s one reason people put dividend payers in a TFSA. Foreign dividends can still have tax withheld at the source, and the account doesn’t always get that back.
Should you take dividends or salary from your own company?
That question sits behind a lot of searches, and no tool answers it alone. Paid as salary, the money adds CPP contributions and is taxed as ordinary income. Paid as a dividend, it goes through the gross-up and credit above. Compare both with your own numbers, starting with the corporate tax calculator, and treat its 2026 small business rate as an estimate, since it’s a blend that isn’t printed on one official page.
An accountant earns their fee on this one, since the answer turns on how much you need to withdraw each year and what you want for retirement income.
What does the calculator not cover?
Only the gross-up and the credits. It doesn’t model income-tested benefits or the OAS recovery tax. A grossed-up dividend counts as more income than the cash you received, so it can push your net income over such a line even when the cheque was modest.
Its provincial credit rates come from published rate tables that weren’t checked against the 2026 worksheets, so a small difference from your return is possible. If you also sold shares, use the capital gains tax calculator, and for your full return, the income tax calculator.
Sources, and how they were checked
The CRA‘s pages on lines 12000 and 12010 and on the federal dividend tax credit (line 40425) give the gross-up percentages and lines. The tax amounts are from our calculator using 2026 federal and provincial rates. No government body has reviewed or endorsed what you read here.
Frequently asked questions
What is the dividend gross-up?
The CRA has you report 138% of eligible dividends and 115% of other-than-eligible dividends on your return. A credit is then subtracted from your tax.
Where do dividends go on my tax return?
Eligible and other dividends both go on line 12000, and the other-than-eligible amount also goes on line 12010. The federal credit is claimed on line 40425.
Do foreign dividends get the credit?
No. The CRA says foreign dividends don't qualify for the federal dividend tax credit.
Do I choose whether a dividend is eligible?
No. The paying corporation decides and the slip shows which type you received.
Can dividends be tax free?
In our calculator, $10,000 of dividends with no other income in Ontario gives $0 extra tax. A real return can have other effects, so check with your own numbers.
- RRSP, TFSA, FHSA and retirement income in Canada
How the RRSP, TFSA and FHSA differ, the 2026 limits, what happens when you withdraw, and where CPP and OAS fit into your retirement income