Dividend tax credit

If you received dividend income (profits from your share of the ownership) during the year as a shareholder of a Canadian corporation, you might be able to claim the federal dividend tax credit. This is a non-refundable tax credit that is designed to prevent double-taxation on your dividend income since the corporation paying these dividends to you has already paid a portion of the taxes on this amount.

Typically, dividend income is shown on one or more of the following slips:

You’ll notice that the dividend income on your slip is higher than the actual amount received. Don’t worry, this is because the corporation “grosses up” the dividend income to show what it was before it paid tax on it. The Canada Revenue Agency (CRA) calculates the tax credit you’re entitled to based on this amount and the type of dividend you received (eligible dividends versus other than eligible dividends), to ensure that the income is not taxed twice.

Even if you didn’t receive an information slip for your dividend income, you must still report it on your return and specify the type of dividend you received.

Note: Foreign dividends do not qualify for the federal dividend tax credit.

Types of dividends

There are two types of dividends: eligible dividends and other than eligible dividends. These dividends differ in the way they are “grossed-up” and taxed.

For example, eligible dividends that’re shown on your slip are calculated by multiplying the actual amount of eligible dividends you received by 138%. Your other than eligible dividends are calculated by multiplying the actual amount of eligible dividends you received by 117%.

If you didn’t receive an information slip for your dividends, you can use the above rates to enter your dividend income for the year on the Schedule 4 page in H&R Block’s tax software.

Note: If you don’t know what type of dividends you received, contact the payer of the dividends.

Provincial tax credit

If you’re eligible for the federal foreign tax credit, you’ll also be able to claim a corresponding provincial/territorial tax credit, which will vary based on the which varies in amount depending on which province or territory you live in:

If you’re a resident of Québec, you can find the taxable amount of dividends you received on the following slips:

box B of your RL-3 slip
box I of your RL-16 slip
box F of your RL-25 slip and
boxes 6-1 to 6-3 of your RL-15 slip

You can also check your T3, T4PS, T5, and T5013 slips for your dividend income amounts. If you didn’t receive any information slips for your dividends, you can calculate the amount to be reported on your return by multiplying the actual amount of the dividends by the following rates:

138% for eligible dividends
117% for ordinary dividends

Note: If you don’t know what type of dividends you received, contact the payer of the dividends.

Where can I claim this?

If you received an information slip(s) for your dividend income, H&R Block’s tax software will automatically calculate your federal and provincial dividend tax credit based on the information you enter from the slip(s) on the QUICK SLIP icon under the QUICK ENTRY tab.

If you didn’t receive an information slip for your dividend income, calculate the taxable amount of your eligible and/or other than eligible dividends using the rates given in the sections above and enter these amounts on the Schedule 4 page in the software. You can find the Schedule 4 page under the PENSION PLANS AND INVESTMENTS icon of the PREPARE tab.