Calculate Grossed Up Dividend Ontario
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When you receive dividends from Canadian corporations, the Canada Revenue Agency (CRA) requires you to "gross up" the dividend amount to account for taxes paid by the corporation. This process ensures you report your income accurately for tax purposes. Our calculator helps you determine the grossed up dividend amount in Ontario.
What is a Grossed Up Dividend?
A grossed up dividend is the total amount of dividends you receive from a corporation, adjusted to reflect the taxes paid by the corporation on that income. The CRA requires investors to report this grossed amount rather than the net amount received.
In Ontario, the grossed up dividend is calculated by dividing the net dividend amount by the corporate tax rate. This gives you the total dividend income before taxes, which you then report on your tax return.
Grossing up dividends is different from grossing up capital gains. Capital gains are taxed at your personal tax rate, while dividends are taxed at the corporate rate.
How to Calculate Grossed Up Dividend
The formula to calculate the grossed up dividend in Ontario is:
Grossed Up Dividend = Net Dividend / (1 - Corporate Tax Rate)
Where:
- Net Dividend - The amount of dividend you actually receive after taxes
- Corporate Tax Rate - The tax rate applied to corporate income in Canada (currently 21.5% for most corporations)
The calculation works by reversing the tax effect. Since the corporation has already paid 21.5% in taxes on the dividend income, you need to add back this amount to get the total dividend income.
Why Gross Up Dividends in Ontario
Grossing up dividends is required by the CRA to ensure you report your total income accurately. This process:
- Accounts for the taxes already paid by the corporation
- Ensures you pay the correct amount of personal income tax
- Prevents underreporting your income
Failing to gross up dividends could result in underpayment of taxes or potential audits. Our calculator helps you avoid these mistakes by providing an accurate calculation.
Example Calculation
Let's say you receive a net dividend of $1,000 from a Canadian corporation. The corporate tax rate is 21.5%. Here's how to calculate the grossed up dividend:
Grossed Up Dividend = $1,000 / (1 - 0.215) = $1,000 / 0.785 ≈ $1,274.23
This means you should report $1,274.23 as your dividend income for tax purposes, even though you only received $1,000.
| Description | Amount |
|---|---|
| Net Dividend Received | $1,000.00 |
| Corporate Tax Rate | 21.5% |
| Grossed Up Dividend | $1,274.23 |
Frequently Asked Questions
Do I need to gross up dividends from US companies?
Yes, dividends from US companies are also subject to grossing up. The process is similar, but you may need to account for different tax rates and withholding taxes.
What if the corporate tax rate changes?
The corporate tax rate can change, so it's important to use the current rate when calculating your grossed up dividend. Our calculator uses the most recent rate.
Can I use this calculator for other provinces?
This calculator is specifically for Ontario. Other provinces may have different tax rules for grossing up dividends.