Infographic
How Canada's dividend tax credit works, in four steps
Gross-up, tax at your rate, federal and provincial credits, what you keep: a $1,000 eligible dividend traced step by step with 2026 Ontario rates (estimate).
In one paragraphA $1,000 eligible dividend is grossed up to $1,380 of taxable income, taxed at your marginal rates, then reduced by the federal credit (15.0198% of $1,380) and a provincial credit. The result is a lower rate than on interest at most incomes.
Step 1
Gross up
$1,000 × 1.38 = $1,380 of taxable income.
Step 2
Tax at your rates
Federal $282.90 + Ontario $126.27 on the grossed-up amount (at $90,000 of other income).
Step 3
Subtract credits
Federal 15.0198% × $1,380 = $207.27; Ontario 10% × $1,380 = $138.00.
Step 4
What you keep
Tax $63.90, so you keep $936.10. The same $1,000 of interest: tax $296.50.
Go deeper
Education, not advice. This site does not recommend, rate or rank any security and does not know your full situation. Check tax details with the CRA or IRS, or a qualified professional. Read the disclaimer.
Primary sources
- CRA — Line 12000 and 12010: Taxable amount of dividends
- CRA — Line 40425: Federal dividend tax credit
- CRA — 5000-D1 Federal Worksheet (2025): gross-up and dividend tax credit rates
- CRA — 2025 provincial and territorial worksheets (5001-D to 5014-D): dividend tax credit rates
Rules checked October 31, 2026. Tax rules and rates change; confirm current details on the official pages above.