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Small Business Dividend Tax Credit

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Personal Tax -> Dividend tax credits -> Small Business Dividend Tax Credit

Small business dividend tax credit

The small business dividend tax credit rate is used for dividends received from Canadian-controlled private corporations (CCPCs), to the extent that their income is subject to tax at the small business rate. A portion of dividends from large public corporations may also be classified as non-eligible (for the enhanced dividend tax credit), or small business dividends.

When an individual receives small business dividends, the amount included in income is 125% of the actual dividend. The additional 25% is referred to as the gross-up.

For a single individual with no income other than taxable Canadian dividends which are eligible for the small business dividend tax credit, approximately $40,600 can be earned in 2009 before any federal taxes are payable. For the maximum amounts that can be earned federally and in each province for 2009, see the table in the article on alternative minimum tax.

Federal & Provincial/Territorial small business dividend tax credit rates

Small Business Dividend Tax Credit Rates as a % of Grossed-up Taxable Dividends (25% gross-up)
Year	Federal	AB	BC	MB	NB	NL	NS	NT	NU	ON	PE	QC	SK	YT
2011	13.33%	3.48%	3.4%	1.75%	5.3%	5%	7.7%	6%	4%	4.5%	1.0%	8%	6%	4.45%
2010	13.33%	3.48%	3.4%	2.5%	5.3%	5%	7.7%	6%	4%	4.5%	2.1%	8%	6%	4.45%
2009	13.33%	3.48%	4.2%	2.5%	5.3%	5%	7.7%	6%	4%	4.5%	3.2%	8%	6%	4.45%
2008	13.33%	4.5%	5.1%	3.15%	5.3%	5%	7.7%	6%	4%	5.13%	4.3%	8%	6%	4.45%
2007	13.33%	5.5%	5.1%	3.67%	5.3%	5%	7.7%	6%	4%	5.13%	6.5%	8%	6%	4.45%
Small Business Dividend Tax Credit Rates as a % of Actual Dividends
Year	Federal	AB	BC	MB	NB	NL	NS	NT	NU	ON	PE	QC	SK	YT
2011	16.67%	4.38%	4.25%	2.19%	6.63%	6.25%	9.63%	7.5%	5%	5.63%	1.25%	10%	7.5%	5.56%
2010	16.67%	4.38%	4.25%	3.13%	6.63%	6.25%	9.63%	7.5%	5%	5.63%	2.63%	10%	7.5%	5.56%
2009	16.67%	4.38%	5.25%	3.13%	6.63%	6.25%	9.63%	7.5%	5%	5.63%	4.00%	10%	7.5%	5.56%
2008	16.67%	5.63%	6.38%	3.94%	6.63%	6.25%	9.63%	7.5%	5%	6.41%	5.38%	10%	7.5%	5.56%
2007	16.67%	6.88%	6.38%	4.59%	6.63%	6.25%	9.63%	7.5%	5%	6.41%	8.13%	10%	7.5%	5.56%

Rates are as known December 31, 2009. 2012 and later years are expected to have the same rates as 2011.

See the following example of the calculation of the taxes payable on small business dividends for taxpayers in the lowest tax brackets:

Small business dividend tax credit using Ontario tax rates for 2009		Tax Bracket 1		Tax Bracket 2
Combined federal + Ontario tax rate		21.05%		24.15%

Dividends eligible for enhanced DTC		$100.00		$100.00
Gross-up		25.00		25.00
Taxable dividend		$125.00		$125.00

Federal + ON tax (at 21.05% & 24.15%)		$26.31		$30.19
Less dividend tax credits:
Federal	13.333% x $125	$16.67		$16.67
Ontario	5.13% x $125	6.41		6.41
Total dividend tax credits			$23.08		$23.08
Tax payable on dividends		$3.23		$7.11

Marginal tax rate		3.23%		7.11%

Revised: April 23, 2010

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