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Tax Comparison Seniors Investment Income 2017

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Personal Tax  -> Dividend tax credits -> 
Tax Rates  -> Tax Comparisons  ->  Tax comparison for seniors with investment income -> 2017

Seniors Tax Comparison: Canadian Dividends vs Other Investment Income 2017

The table on this page compares taxes payable by province in 2017 for two different types of income:

bulletCanadian dividends eligible for the enhanced dividend tax credit, and
bulletother income, such as interest and foreign dividends.

To the above income we add:

bullet$6,942 of OAS - this is the annual max for 2017 based on Jan to Jun 2017 rates
bullet$8,221 of CPP retirement income - this is the average for 2017
bullet$24,000 of pension income that is eligible for the pension income tax credit

The calculations assume that the income is received by a single senior. The tax rates used are as known on June 14, 2017.

Notes:
     - The clawback of OAS reduces taxable income, and is included in taxes payable.
     - BC taxes payable include MSP premiums payable for 2018 based on 2017 income.
     - Ontario - includes Ontario Health Premium.
     - QC includes health contribution, contribution to the health services fund, and prescription drug insurance plan premiums.

Income
Type
Annual
Amount
OAS $6,942
CPP 8,221
Eligible Pension Income 24,000
Total before investment income   $39,164

The first comparison uses $30,000 of eligible dividends compared to $30,000 of other income.

Income
Type
Annual Income
Case A
Dividends
Case B
Interest
Income from above 39,164 39,164
Eligible Dividends 30,000 nil
Interest Income nil 30,000
Total Income 69,164 69,164
Gross-up 11,400 nil
OAS Clawback -866 nil
Taxable Income 79,697 69,164
 

The following table compares the taxes payable on the above incomes.

Province/
Territory
Taxes Payable Increase
in Taxes
Increase
as % of A
Case A
Dividends
Case B
Interest
AB 8,122 14,099 5,977 74%
BC 7,660 13,892 6,231 81%
MB 11,975 16,410 4,435 37%
NB 9,155 16,346 7,190 79%
NL 13,381 16,736 3,354 25%
NS 12,237 17,101 4,863 40%
NT 5,403 12,120 6,717 124%
NU 6,349 10,786 4,436 70%
ON 7,976 13,867 5,891 74%
PE 11,235 16,778 5,543 49%
QC 13,256 18,401 5,145 39%
SK 9,138 15,201 6,063 66%
YT 6,305 13,271 6,966 110%

You can see above that in a couple of the territories, more than double the income tax is payable with interest instead of eligible dividends.

The next comparison uses $50,000 of eligible dividends compared to $50,000 of other income.

Income
Type

Annual Income

Case C
Dividends
Case D
Interest
Income from above 38,821 38,821
Eligible Dividends 50,000 nil
Interest Income nil 50,000
Total Income 88,821 88,821
Gross-up 19,000 nil
OAS Clawback -5,006 -2,156
Taxable Income 103,157 87,007
 

The following table compares the taxes payable on the above incomes.

Province/
Territory
Taxes Payable Increase
in Taxes
Increase
as % of A
Case C
Dividends
Case D
Interest
AB 13,245 22,110 8,865 67%
BC 13,149 21,659 8,511 65%
MB 19,386 25,481 6,095 31%
NB 14,663 25,235 10,572 72%
NL 21,335 25,989 4,654 22%
NS 19,327 26,237 6,910 36%
NT 10,900 20,076 9,176 84%
NU 12,455 18,048 5,593 45%
ON 14,384 22,099 7,715 54%
PE 17,792 25,919 8,127 46%
QC 20,881 27,735 6,854 33%
SK 14,700 22,327 7,628 52%
YT 11,842 21,186 9,344 79%

Although the higher taxable income with Canadian eligible dividends causes a clawback of the OAS and a higher clawback of the age credit, the taxes payable are still significantly lower.

To see the tax results for your own income situation, and how it would change if the type of investment income changes, use our Income Tax Planning Calculators, in particular the Investment Income Tax Calculator.  However, the Investment Income Tax Calculator does not include BC MSP in the total taxes, because MSP is not actually part of the income tax system.  In the detailed Canadian Income Tax and RRSP Savings Calculator, the BC MSP is shown at the bottom of the calculator, but not included in the total taxes payable.

See also Tax Comparisons by Province and Territory, which compare different levels of employment income for people who are not seniors.

Tax Tip:  Although Canadian dividends increase the OAS clawback, the net tax payable is still much less than with interest or foreign dividends.

Revised: May 29, 2017

 

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