Grossed Up Dividend Ontario Calculator
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Reviewed by Calculator Editorial Team
When you receive dividends from Canadian corporations, the Canada Revenue Agency (CRA) requires you to report them as gross income. However, to accurately determine your taxable income, you need to calculate the "grossed up" dividend amount. This calculator helps you estimate your grossed up dividend in Ontario.
What is a Grossed Up Dividend?
A grossed up dividend is the amount of dividends you receive from a corporation, adjusted to reflect the tax implications on the corporation's retained earnings. The CRA requires that dividends be reported as gross income, but the corporation's tax on those dividends must be accounted for in your taxable income.
The grossed up dividend amount is calculated by dividing the dividend by (1 - corporate tax rate). This adjustment ensures that your personal tax liability accounts for the corporation's tax on the dividends.
How to Calculate Grossed Up Dividend
The formula to calculate the grossed up dividend is:
Grossed Up Dividend = Dividend / (1 - Corporate Tax Rate)
Where:
- Dividend - The amount of dividends you receive from the corporation
- Corporate Tax Rate - The tax rate applied to the corporation's income (varies by province)
In Ontario, the corporate tax rate is typically 15%.
Ontario Tax Rates
As of 2023, the corporate tax rate in Ontario is 15%. This rate is applied to the corporation's taxable income, which includes the dividends paid to shareholders.
When you receive dividends, the corporation has already paid tax on those dividends. The grossed up dividend calculation adjusts your personal taxable income to account for this pre-taxed amount.
Example Calculation
Let's say you receive $1,000 in dividends from a corporation in Ontario. The corporate tax rate is 15%.
Using the formula:
Grossed Up Dividend = $1,000 / (1 - 0.15) = $1,000 / 0.85 ≈ $1,176.47
This means that the $1,000 dividend you received is equivalent to $1,176.47 in your taxable income, accounting for the corporation's tax on that amount.
FAQ
Why do I need to gross up my dividends?
Grossing up dividends ensures that your personal taxable income accurately reflects the corporation's tax on the dividends. This adjustment is required by the Canada Revenue Agency to ensure fair taxation.
Is the corporate tax rate the same for all provinces?
No, the corporate tax rate varies by province. In Ontario, it is 15%, but other provinces may have different rates.
Do I need to gross up dividends from foreign corporations?
Yes, dividends from foreign corporations are also subject to grossing up if they are taxable in Canada. The corporate tax rate used would be the rate applicable to the corporation's tax residence.
Can I use this calculator for dividends from other provinces?
This calculator is specifically for Ontario. For other provinces, you would need to use the applicable corporate tax rate for that province.