How are dividends taxed in Canada?

Best Wishes,
D4L

I’ve written a post on dividend tax credits here:

http://financialjungle.com/2007/05/10/taxes/how-to-calculate-dividend-tax-credits/

Here in the U.S. we were elated when the marginal tax rate on “qualified” dividends was cut to 15%. Obviously, not all investments qualify. I assume that the same would be true in Canada, such as dividends from U.S.-based companies?

Again, thanks for your insight.

Best Wishes,
D4L

In Canada, US dividends are taxed as regular income @ marginal tax rate. However, US withhold the first 15% (outside registered accounts). This 15% is mandatory even if your income is below the personal exemption of $9,600.

Yeah, the Canadian dividend tax credit is a fantastic deal. e.g. if 2 portfolio generate identical total returns, the one with the higher dividend yield will dole out better after-tax return.

BTW, your blog is surging full steam ahead. Seems like only yesterday when you started your dividend blog, but now you’re a veteran.

Did you get a chance to read Byron Wien’s “2008 Predictions List” on bloomberg.com this week? I am interested in your opinions about what he thinks will unfold this year. It is amazing that year-after year he puts out this list of items which are, often times, not conventional wisdom and a high percentage of them come true.

After you read his targets for gold, inflation and the unemployment rate…it is hard to imagine a good equity market environment. Happy New Year!

Okay, I just reviewed Byron Wien’s 2008 predictions list, but macro predictions aren’t my cup of tea so I probably can’t offer much insight into this. I also think that over the long haul, the “alpha” of tailgating every prediction will not compensate the cost burdens, namely tax drags, transaction costs and missed dividends.