Seniors Tax Comparison: Canadian Dividends vs Other Investment Income 2016

The table on this page compares taxes payable by province in 2016 for two different types of income:

	Canadian eligible dividends, and
	other income, such as interest and foreign dividends.

To the above income we add:

	$6,846 of OAS - this is the annual max for 2016 based on Jan to Jun 2016 rates
	$7,975 of CPP retirement income
	$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, 2016.

Notes:

	The clawback of OAS reduces taxable income, and is included in taxes payable.
	BC taxes payable include MSP premiums payable for 2017 based on 2016 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	$6,846
CPP	7,975
Eligible Pension Income	24,000
Total before investment income	$38,821

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

Income Type	Annual Income
Income Type	Case A Dividends	Case B Interest
Income from above	38,821	38,821
Eligible Dividends	30,000	nil
Interest Income	nil	30,000
Total Income	68,821	68,821
Gross-up	11,400	nil
OAS Clawback	-970	nil
Taxable Income	79,251	68,821

The following table compares the taxes payable on the above incomes - the taxes payable include any applicable OAS clawback.

Province/ Territory	Taxes Payable		Increase in Taxes	Increase as % of A
Province/ Territory	Case A Dividends	Case B Interest	Increase in Taxes	Increase as % of A
AB	8,190	14,107	5,917	72%
BC	7,803	13,936	6,132	79%
MB	12,055	16,428	4,373	36%
NB	10,047	16,345	6,298	63%
NL	12,583	16,092	3,509	28%
NS	12,251	17,051	4,801	39%
NT	5,485	12,132	6,647	121%
NU	6,437	10,801	4,364	68%
ON	8,074	13,886	5,812	72%
PE	11,263	16,744	5,481	49%
QC	13,498	18,429	4,931	37%
SK	9,256	15,329	6,074	66%
YT	6,392	13,282	6,890	108%

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
Income Type	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	-5,110	-2,260
Taxable Income	102,711	86,561

The following table compares the taxes payable on the above incomes - the taxes payable include any applicable OAS clawback.

Province/ Territory	Taxes Payable		Increase in Taxes	Increase as % of A
Province/ Territory	Case C Dividends	Case D Interest	Increase in Taxes	Increase as % of A
AB	13,342	22,162	8,819	66%
BC	13,340	21,812	8,471	64%
MB	19,496	25,740	6,244	32%
NB	16,147	25,294	9,146	57%
NL	20,172	25,033	4,861	24%
NS	19,365	26,234	6,869	35%
NT	11,017	20,162	9,145	83%
NU	12,580	18,378	5,798	46%
ON	14,567	22,200	7,633	52%
PE	17,850	25,932	8,082	45%
QC	21,154	27,970	6,816	32%
SK	14,836	23,861	9,025	61%
YT	11,959	21,244	9,285	78%

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 Detailed Income Tax and RRSP Savings Calculators, and our very simple 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: October 26, 2023