Updated Checked by the Tax-Services.ca editorial team How we check
There’s no single rate. Dividend tax rates in Canada depend on the type of dividend and on what else you earned. On $10,000 of eligible dividends, an Ontario worker earning $80,000 pays about $639 more tax. On the same $10,000 as non-eligible dividends, the extra tax is about $2,028.
What is the difference between eligible and non-eligible dividends?
It comes down to the tax the company already paid. An eligible dividend comes from income taxed at the general corporate rate, and the company has to designate it as eligible. Most dividends from public companies are eligible. Non-eligible dividends are everything else, and they usually come from private companies whose income got the small business rate.
Check the paperwork from the payer before you assume. It says which kind you got.
How are dividends taxed on your return?
You don’t pay a flat rate on the cash you got. First the dividend is grossed up, meaning it’s increased to stand in for the corporate tax already paid. Your tax is worked out on that larger number. Then a credit comes off, one federal and one from the province. The gross-up sounds like a penalty, but the credit is built to cancel most of it, which is why the whole thing works out lower than a salary would on the same amount at many income levels.
| Item | Eligible dividend | Non-eligible dividend |
|---|---|---|
| Gross-up | 38% | 15% |
| Federal credit, share of the gross-up | 6/11 | 9/13 |
| Federal credit, share of the grossed-up amount | 15.02% | 9.03% |
| Ontario credit, share of the grossed-up amount, 2026 | 10% | 2.9863% |
The federal fractions come from the CRA’s tax folio on dividends. The Ontario credits come from the province’s own page, which lists 2.9863% for other Canadian dividends through 2026 and 1.9863% from 2027. That’s a small change, but it matters if you pay yourself dividends from a private company.
The CRA’s own instructions for people with no slip are plain: multiply an eligible dividend by 138%, and a non-eligible one by 115%. Its guide to lines 12000 and 12010 shows both.
What do dividend tax rates come to in Ontario?
We ran $10,000 of dividends through the dividend tax calculator for an Ontario resident whose other income is a salary. Extra tax means the tax on the dividends, compared with the same year without them.
| Other income | Eligible, extra tax | Non-eligible, extra tax |
|---|---|---|
| $80,000 | $638.97 (6.4%) | $2,027.86 (20.3%) |
| $150,000 | $1,962.69 (19.6%) | $3,579.72 (35.8%) |
Look at the gap in the first row. At $80,000 the eligible dividend keeps about $9,361 of the $10,000. The non-eligible one keeps about $7,972. That’s more than $1,300 lost to the label on the slip.
These figures include the effect on Ontario’s surtax and health premium, which is why a rate can look odd. The Ontario health premium climbs 25 cents per dollar of taxable income in narrow bands, and a grossed-up dividend adds to that income. Your own bill will differ a little, because other credits and deductions move it.
Where do people go wrong with dividends?
The first mistake is to work from the cash you got. If you received $10,000, the amount taxed is $13,800 for an eligible dividend and $11,500 for a non-eligible one, and an estimate built on the smaller figure will come out low.
The second is to assume dividends are always cheap. At low income, the credits can wipe out tax on the dividends completely. At high income, a non-eligible dividend is taxed heavily, and the combined rate can pass 35% on the extra dollars, as the table shows.
Third, the credits are non-refundable. They cut your tax to zero, and nothing comes back after that.
To see what the next dollar of dividends costs you, try the marginal tax rate calculator at your income. That’s a quick test before you decide how a private company should pay you.
Should dividend stocks sit in a TFSA?
Dividends earned inside a TFSA aren’t taxed at all, and the 2026 TFSA limit is $7,000, so the space fills up fast and you have to pick what goes in first. Anything that doesn’t fit stays in a regular account, where the credits above apply to Canadian dividends. The TFSA calculator shows how far a plan can grow, and the income tax calculator gives you the full-year picture.
What does a dividend slip look like at tax time?
Dividends from Canadian companies arrive on a T5 slip or, from mutual funds and trusts, a T3 or T5013. Box amounts show the actual dividend, the taxable amount and the credit, so you rarely do the gross-up by hand. Say Lena in Kelowna gets a $400 dividend from her bank shares. The slip already shows the grossed-up figure, and her tax software picks it up. What she needs to do is check that the amounts on the slip match the statements from her broker, before the filing deadline rolls around.
Our sources
The gross-up and federal credit fractions come from the CRA‘s income tax folio on taxable dividends. Ontario’s credit rates are from the Government of Ontario’s dividend tax credit page, updated April 2026. Our examples use the 2026 federal and Ontario brackets published by the CRA. The dividend rules for other provinces differ, so choose your province in the calculator.
Frequently asked questions
What is the gross-up on eligible dividends?
It is 38%. A $1,000 eligible dividend is counted as $1,380 of income before the credits come off.
What is the gross-up on non-eligible dividends?
It is 15%, so a $1,000 dividend is counted as $1,150.
Are dividends taxed lower than a salary?
Often, yes, especially eligible dividends at low and middle incomes. The tax base is larger after the gross-up, but the credits are big enough to cancel much of it.
Does the Ontario dividend credit change in 2027?
Ontario's page lists the credit for non-eligible dividends at 2.9863% through 2026 and 1.9863% from 2027. The eligible rate stays at 10%.
Can dividends cost nothing in tax?
At a low income the credits can cancel the tax on them, and the calculator will say so when the credits also cut tax on your other income. The result depends on the rest of your return.
- 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