Alternative minimum tax on Canadian dividends

Dividends eligible for the enhanced dividend tax credit

In the following table, the Federal column for eligible dividends shows the amount of actual dividends that can be earned before federal tax or federal AMT kicks in, if there is no income other than the dividends.  The provincial columns show the amount of actual dividends that can be earned in each province before any regular provincial income tax (net of any low income tax reduction) is payable.  However, if this amountexceeds the amount of dividends in the Federal column, AMT will be payable for all provinces except Québec, which does not base its AMT on the federal AMT.  The provincial columns also show the total amount of regular federal income tax, plus federal and provincial AMT payable at the indicated amount of dividends, for 2012 and 2011.

In 2012, because of the higher federal marginal tax rate for eligible dividends than 2011, regular federal taxes start to be payable when actual eligible dividends reach the amount of $47,892.  AMT starts when the dividends reach $56,097, and at this point there is $791 of federal tax payable.  The federal AMT is applicable for dividends above this amount, until the amount of the dividends reaches $101,970, when the regular federal tax exceeds the minimum amount.

In 2011, federal AMT starts at $50,530 of actual eligible dividends, and is phased out at $212,563, when the regular federal tax exceeds the minimum amount.

Both tables are based on income tax rates as known on December 16, 2011.

2012 Federal AB BC(1) MB NB NL NS NT NU ON(2) PE QC(3) SK YT
Actual eligible dividends $47,892 n/a $111,982 $52,683 144,046 86,285 30,514 224,017 93,990 56,088 44,700 33,901 88,588 n/a
Total fed. taxes + prov. AMT 0 9,604 462 15,789 5,460 0 31,218 6,594 790 0 0 5,801
Provincial AMT as % of Federal AMT (4) 35% 33.7% 50% 57% 51.3% 57.5% 45% 45% 33.67% 57.5% n/a 50% 44%

2011 Federal AB BC(1) MB NB NL NS NT NU ON(2) PE QC(3) SK YT
Actual eligible dividends $50,530 n/a $120,448 $51,263 137,134 81,917 29,864 213,958 95,416 51,800 43,749 32,313 84,326 n/a
Total fed. taxes + prov. AMT 0 10,766 166 13,203 5,464 0 26,231 7,410 256 0 0 5,824
Provincial AMT as % of Federal AMT (4) 35% 33.7% 50% 57% 51.3% 57.5% 45% 45% 33.67% 57.5% n/a 50% 44%

(1) BC excludes Medical Services Plan Premiums
(2) ON excludes Ontario Health Premium
(3) QC excludes contribution to the health services fund, health contribution, and prescription drug insurance plan premiums.
(4) The BC, NL and ON AMT rates are calculated as lowest provincial tax rate / lowest federal tax rate.

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