Dividend Tax Credit on Canadian Dividends

The Dividend Tax Credit works as follows:

- Take the actual amount of dividends received from taxable Canadian corporations.

- Gross up (increase) this amount by 45%.

- Calculate the federal tax on the grossed up dividends by multiplying the grossed up dividends by the investor's marginal tax rate.

- Multiply the grossed up dividends by 19%.

- The result is the Dividend Tax Credit

- Subtract the tax credit from the amount of federal tax. This gives the net tax to be paid.

Provincial tax for all provinces except Quebec is based on the federal taxes to be paid.


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