Take a person with $70,000 of other income who receives $10,000 in eligible dividends. The tax on those dividends comes to about $789, or 7.9%. Had the same $10,000 arrived as non-eligible dividends, the bill would be about $2,178, and as interest it would be about $3,115. The kind of income matters. A lot.
Eligible versus non-eligible
Eligible dividends usually come from public Canadian companies and from large corporations that paid full corporate tax. Private companies that used the small business rate tend to pay non-eligible dividends instead. The two get different treatment, and your slip states which kind you were paid.
How the gross-up works
You are taxed on more than the cash you received. Eligible dividends are increased by 38%, non-eligible ones by 15%. So $10,000 of eligible dividends puts $13,800 on your return. It makes up for tax the company has already paid on the profit behind the payout.
The dividend tax credit
Credits then offset the gross-up. Federally, eligible dividends earn 15.0198% of the grossed-up amount, and non-eligible ones 9.0301%. Ontario adds 10% and 2.9863%. At most incomes, these credits leave dividends cheaper to tax than interest.
Where the Ontario surtax fits
Ontario credits cut the provincial tax before the surtax is worked out. The calculator follows that order and then adds the health premium. A simple rate table skips these steps, which is why its answer can differ from the result above.
Reading the comparison
The table shows the tax on $10,000 from three sources, using your other income as the base. Low incomes can see eligible dividends taxed very lightly. Higher up, the gap narrows. It never closes. Non-eligible ones sit between.
Choosing the account
Inside a TFSA, dividends are tax-free. In an RRSP they are taxed when you withdraw, and the credit is lost. A regular account is where the credit works for you. Pick with care.
What the calculator leaves out
Three things are not modelled: the alternative minimum tax, foreign dividends, and changes to Ontario’s credit rate in later years. The figures follow the CRA’s 2026 rules. Check again at filing time, because rules and rates get updated and the calculator only reflects what was known when it was built.
For Toronto and Ontario investors
Bank and utility shares are common holdings in Ontario, and they pay eligible dividends. Tax on them is low at middle incomes and can be close to zero at very low ones, which surprises many first-time investors. Owners of a private company usually take non-eligible dividends, which cost more. An accountant can weigh a salary against dividends for you.
Finding the amounts on your slips
On a T5 slip, box 24 holds the actual eligible dividends and box 25 the taxable amount. Box 10 covers other dividends, with box 11 as the taxable amount. Type in the actual amounts you received, not the grossed-up ones. Boxes 24 and 10.
Effects on benefits
The gross-up lifts your net income for benefit tests, even though the cash was smaller. Income-tested benefits such as the Canada Child Benefit or Old Age Security can shrink as a result. Retirees in particular should look at this before choosing dividend stocks. The result shows it.
Where to go next
Find your bracket in the marginal tax rate calculator. Set the result against gains with the capital gains tax calculator. The TFSA calculator helps plan tax-free savings, and the income tax calculator covers your full return.
Frequently asked questions
What is the difference between eligible and non-eligible dividends?
Eligible dividends come from companies that paid the full corporate rate. Non-eligible ones often come from private companies.
What is the gross-up?
38% for eligible dividends and 15% for non-eligible dividends.
Are dividends taxed less than interest?
Usually yes, thanks to the dividend tax credit.
Are TFSA dividends taxed?
No. Dividends inside a TFSA are tax-free.
Does Ontario have its own credit?
Yes, 10% for eligible and 2.9863% for non-eligible dividends, of the grossed-up amount.
Where do I find the type of dividend?
On your T5 or T3 slip.
Sources and updates
Last reviewed: . Full disclaimer. How we build calculators. Editorial policy.
Estimate only. This calculator gives general information for planning. It is not tax, legal or financial advice, and it is not affiliated with the City of Toronto, MPAC or the Canada Revenue Agency. Results depend on the numbers you enter and may differ from official amounts. Check official sources or a qualified professional before you decide.