Q I am single and will have no income this year. However, I receive dividends from my investments. How much dividend can I receive and at what rate will I be taxed? Are all dividends treated and reported the same for tax purposes?
A Dividends are more tax friendly than interest income and most other forms of income. However, dividends are generally paid by a corporation to its shareholders. Therefore, individuals must be willing to accept the risk associated with corporate ownership.
There are several types of dividends but most individuals are commonly exposed to foreign, eligible and ineligible dividends.
Foreign dividends received from U.S. corporations are taxed similar to interest income.
Since 2005, publicly traded shares such as Bell, RBC, Suncor pay out eligible dividends and many private corporations pay out ineligible dividends. Not to dwell on the technical aspects, the type of dividend is determined based on whether the company benefited from the small business deduction or its general rate income pool (GRIP).
Individuals who receive eligible dividends are taxed on a grossed-up 145 per cent and will receive a 19 per cent tax credit (of the grossed-up dividend). An individual with no other income can receive approximately $50,000 before paying any income taxes. Taxpayers in receipt of an ineligible dividend are taxed on the grossed-up 125 per cent and get a 131/3 per cent tax credit (of grossed-up amount). Individuals can receive about $37,000 in dividend before paying taxes. Generous amounts for some risk taking.
Q Is a non-resident landlord obligated to pay taxes?
A. The non-resident landlord is obligated to remit 25 per cent of gross rental income collected. Under section 216 of the act, this amount maybe reduced. Tax filing can be complex and you should consult an accountant familiar with non-residents in receipt of rental income.
– Henry Choo Chong, CGA, can be reached at firstname.lastname@example.org