As a Canadian taxpayer, it’s important to understand the different types of dividends that can affect your tax return. One such type of dividend is assessable dividends. In this blog post, we will discuss everything you need to know about assessable dividends, including what they are, how they are taxed, and how to report them on your tax return.

Assessable dividends are dividends paid by Canadian corporations that are subject to tax at a higher rate than non-assessable dividends. They are also known as “eligible dividends” and are typically paid out of a corporation’s taxable income. The amount of assessable dividends that you receive will depend on the number of shares that you own in the corporation.

Assessable dividends are subject to a lower tax rate than regular income, but they are still subject to taxation. The exact rate at which they are taxed will depend on your income level and the province in which you reside. For example, in Ontario, the tax rate for assessable dividends is currently 38.29% for individuals with a taxable income over $220,000.

It’s important to note that if you receive assessable dividends, you will also receive a tax credit to help offset the tax you owe. This tax credit is called the dividend tax credit and is designed to recognize that the income you received has already been taxed at the corporate level.

When it comes to reporting assessable dividends on your tax return, you will need to include them on your T5 slip, which is provided by the corporation that paid the dividends. You will also need to report the amount of assessable dividends on your personal tax return using the appropriate form, such as the T1 Income Tax and Benefit Return.

It’s important to ensure that you report all assessable dividends that you receive, as failing to do so could result in penalties or interest charges. If you’re unsure about how to report your dividends or have any other questions related to your taxes, it’s always best to seek the advice of a qualified tax professional.

In conclusion, assessable dividends are an important type of income to understand for Canadian taxpayers. While they are subject to taxation, they are taxed at a lower rate than regular income and are accompanied by a tax credit to help offset the tax owed. By properly reporting your assessable dividends on your tax return, you can ensure that you remain compliant with tax laws and avoid any potential penalties or interest charges.