What's the difference between eligible and non-eligible dividends?

Eligible dividends are paid from corporate income taxed at the general rate (typically by public companies and large CCPCs). They're grossed up 38% and get a larger dividend tax credit, so they're taxed at a lower rate. Non-eligible (or 'other than eligible') dividends come from income taxed at the small-business rate; they're grossed up 15% with a smaller credit, so the effective rate is higher.

What is the dividend gross-up and tax credit?

Canada grosses up your actual dividend to approximate the corporation's pre-tax income — by 38% for eligible and 15% for non-eligible dividends — and taxes that larger amount at your marginal rate. It then gives a dividend tax credit (federal 15.0198% of the grossed-up amount for eligible, 9.0301% for non-eligible, plus a provincial credit) to refund the corporate tax already paid, so the same income isn't taxed twice.

Can dividends ever be taxed at a negative rate?

Effectively, yes. At low income levels the dividend tax credit can exceed the tax on the grossed-up dividend, so eligible dividends can carry a negative effective rate — the credit shelters other income too. This is why a retiree with little other income can receive a substantial amount of eligible dividends with very little or no tax.

Canada · 2026

Canada Dividend Tax Calculator

Canadian dividends are grossed up and then handed a tax credit — so the headline rate is misleading. See the real tax on eligible vs non-eligible dividends at your income, in any province.

Your dividends

Province / territory

Other taxable income Employment etc., before dividends

Actual dividend received The cash amount, before gross-up

Dividend type

Tax on your dividends

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— effective · eligible

If eligible

0% effective

If non-eligible

0% effective

Taxable (grossed-up) amount$0

Tax at your marginal rate$0

Dividend tax credit (fed + prov)$0

Net tax on dividends$0

After-tax dividend$0

Effective rate

Eligible saves you

How Canadian dividends are taxed

It's a two-step dance designed to avoid double taxation. First the dividend is grossed up — multiplied by 1.38 for eligible dividends or 1.15 for non-eligible — to approximate the pre-tax profit the company earned. That larger amount is added to your income and taxed at your marginal rate. Then a dividend tax credit (federal plus provincial) refunds the corporate tax already paid. The result is that Canadian dividends are usually taxed more lightly than interest or regular income.

Eligible vs non-eligible

Eligible dividends come from profits taxed at the full corporate rate — typically public companies. They get the bigger gross-up and a generous credit (federal 15.0198% of the grossed-up amount), so they're taxed the most lightly. Non-eligible dividends come from small-business income taxed at the lower rate; the smaller credit (federal 9.0301%) means a higher effective tax rate for you. Your T5 slip tells you which is which.

The low-income surprise

Because the credit can be larger than the tax on the grossed-up amount, eligible dividends can carry a negative effective rate at low incomes — the leftover credit shelters your other income too. It's why a retiree living mostly on eligible Canadian dividends can receive a sizeable amount with little or no tax. Push your income up, though, and the top combined rate on non-eligible dividends approaches 50% in several provinces.

Frequently asked questions

Are dividends in my TFSA or RRSP taxed this way?

No. Dividends earned inside a TFSA are completely tax-free — no gross-up, no credit, no reporting. Inside an RRSP they're tax-deferred and don't get the dividend tax credit; they're taxed as ordinary income when withdrawn. This calculator covers dividends in a non-registered (taxable) account.

Why gross up the dividend at all?

The gross-up rebuilds the corporation's pre-tax profit, because the company already paid tax before sending you the dividend. Taxing the grossed-up amount and then granting a credit for that corporate tax keeps the combined corporate-plus-personal tax roughly equal to what you'd have paid earning the income directly — the principle of "integration."

How accurate is the Quebec figure?

Quebec is approximate. It administers its own income tax and dividend tax credit alongside the 16.5% federal abatement, and this tool models that simplified. The top combined rates match published figures, but mid-bracket Quebec results may differ slightly — confirm with Revenu Québec.

Canada corporation tax

Where dividends start

Educational estimate — not tax advice. Canada 2026 tax year. Eligible dividends: 38% gross-up, federal dividend tax credit 15.0198% of the grossed-up amount; non-eligible: 15% gross-up, federal credit 9.0301%. Provincial/territorial dividend tax credits applied per jurisdiction (e.g. Ontario 10% eligible / 2.9863% non-eligible; Saskatchewan's 2025 non-eligible increase was cancelled, so 2.52% is used; Nova Scotia non-eligible reduced to 1.5%). The dividend is grossed up, stacked on the other taxable income you enter and taxed using the 2026 federal and provincial brackets (Ontario surtax and the Quebec 16.5% abatement included; Quebec is approximate). Top combined marginal rates reconcile to published combined-rate figures for every province and territory (unchanged from 2025, as the rate changes were to the lowest bracket). Dividend tax credit rates are the latest published and carry forward to 2026. It applies the basic personal amount only to your other income, and excludes the impact of the gross-up on income-tested benefits and credits (OAS clawback, age amount, GIS, etc.), the alternative minimum tax, and provincial low-income reductions. Confirm with the CRA or an accountant.