Dividend Gross-Up
Majoration du dividende in French
Quick definition
The dividend gross-up inflates a Canadian dividend before it enters your taxable income: 38% for eligible dividends and 15% for non-eligible ones. It estimates the pre-tax corporate profit the dividend came from.
Why a dividend gets inflated
A Canadian dividend is paid out of profit the corporation has already paid tax on. If you were then taxed on the full dividend at your own rates, the same income would be taxed twice.
Canada solves this with a two-part mechanism called integration. First the dividend is grossed up to approximate what the corporation earned before it paid its own tax. Then a dividend tax credit gives you back an estimate of the corporate tax already paid.
The gross-up on its own looks like a penalty. It only makes sense paired with the credit, and the two are always claimed together.
The two rates
The gross-up rate depends on which corporate tax rate produced the income, which is what separates the two dividend types described in eligible vs non-eligible dividends.
| Dividend type | Gross-up | $10,000 cash becomes |
|---|---|---|
| Eligible | 38% | $13,800 of taxable income |
| Non-eligible | 15% | $11,500 of taxable income |
What the gross-up quietly costs you
The grossed-up figure, not the cash you received, is what appears in your net income. Several income-tested benefits and credits are calculated on net income, and they are computed before any tax credits are applied.
That means the dividend tax credit does not undo the damage. Old Age Security clawback, the Canada Child Benefit, the age credit, the GST/HST credit and provincial benefits are all measured against a number the gross-up has pushed up.
For a retiree near the OAS clawback threshold this is not a technicality: $10,000 of eligible dividends adds $13,800 to the income the clawback is measured against, even though only $10,000 arrived in the bank account.
Where the gross-up does not apply
Only dividends from taxable Canadian corporations are grossed up. Dividends from US and other foreign companies get no gross-up and no credit; they are taxed as ordinary income at your full rate and often carry foreign withholding tax as well.
Distributions from Canadian real estate investment trusts and most exchange-traded funds holding foreign equity are also not dividends for this purpose, even when a brokerage statement labels them that way. Your T5 and T3 slips are what settle it.
Inside a TFSA, RRSP, FHSA or RESP there is no gross-up at all, because there is no taxable income to gross up.
In Canada
The gross-up rates have been stable for over a decade: 38% for eligible dividends since 2012, and 15% for non-eligible dividends since 2019 when the last of a series of scheduled reductions took effect.
Your T5 slip reports both figures. Box 24 is the actual eligible dividend and box 25 is the grossed-up amount; box 10 and box 11 do the same for non-eligible dividends. Tax software fills these in automatically, which is why many Canadians never notice the mechanism at all.
The gross-up is one reason a dividend-heavy portfolio held outside registered accounts can look more expensive on paper than its actual tax cost, and simultaneously more expensive in reality for anyone whose benefits are income tested.
Worked example
Elena receives $10,000 of eligible dividends from Canadian bank shares held in a non-registered account. Her taxable income rises by $13,800, not $10,000. At an Ontario middle-bracket rate the tax on that $13,800 is about $4,092, but she then claims a federal dividend tax credit of $2,073 and an Ontario credit of $1,380, leaving roughly $639 of actual tax on the dividend. The same $10,000 as GIC interest would have cost her about $2,965.
Reviewed by Alexandre Bernier, CFP®, CIM®, PFP®·Updated September 2026