2018 Seniors Tax Comparison: Canadian Dividends vs Other Investment Income

The table on this page compares taxes payable by province in 2018 for two different types of income:

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

To the above income we add:

	$7,121 of OAS - this is the annual max for 2018
	$8,300 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 July 25, 2019.

Notes:

	The clawback of OAS reduces taxable income, and is included in taxes payable.
	BC taxes payable include MSP premiums payable for 2019 based on 2018 income.
	Ontario - includes Ontario Health Premium.
	QC includes health contribution, contribution to the health services fund, and prescription drug insurance plan premiums.
	QC dividends are assumed to be earned after March 27, 2018.

Income Type	Annual Amount
OAS	$7,121
CPP	8,300
Eligible Pension Income	24,000
Total before investment income	$39,421

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	39,421	39,421
Eligible Dividends	30,000	nil
Interest Income	nil	30,000
Total Income	69,421	69,421
Gross-up	11,400	nil
OAS Clawback	-737	nil
Taxable Income	80,084	69,421

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

Province/ Territory	2018 Taxes Payable		Case B Increase in Taxes	Increase as % of A
Province/ Territory	Case A Dividends	Case B Interest	Case B Increase in Taxes	Increase as % of A
AB	8,003	14,058	6,055	76%
BC	7,044	13,398	6,354	90%
MB	11,852	16,364	4,512	38%
NB	9,033	16,304	7,271	80%
NL	13,204	16,631	3,427	26%
NS	12,169	17,067	4,898	40%
NT	5,265	12,070	6,805	129%
NU	6,208	10,735	4,527	73%
ON	7,819	13,807	5,988	77%
PE	11,068	16,690	5,622	51%
QC	12,881	18,088	5,207	40%
SK	8,796	15,073	6,277	71%
YT	6,252	13,222	6,970	111%

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	39,421	39,421
Eligible Dividends	50,000	nil
Interest Income	nil	50,000
Total Income	89,421	89,421
Gross-up	19,000	nil
OAS Clawback	-4,877	-2,027
Taxable Income	103,544	87,394

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

Province/ Territory	Taxes Payable		Case D Increase in Taxes	Increase as % of C
Province/ Territory	Case C Dividends	Case D Interest	Case D Increase in Taxes	Increase as % of C
AB	13,090	22,010	8,920	68%
BC	12,471	21,088	8,617	69%
MB	19,228	25,573	6,345	33%
NB	14,491	25,118	10,627	73%
NL	21,114	25,823	4,709	22%
NS	19,225	26,188	6,963	36%
NT	10,731	19,935	9,204	86%
NU	12,266	18,182	5,916	48%
ON	14,115	21,935	7,820	55%
PE	17,589	25,772	8,183	47%
QC	20,474	27,347	6,873	34%
SK	14,195	23,401	9,206	65%
YT	11,673	21,078	9,405	81%

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