Eligible dividend gross up 2026: 38%, with a 15.0198% federal credit

The 2026 gross up and federal credit, side by side

Nothing changed for 2026. The gross up sits in paragraph 82(1)(b) of the Income Tax Act: 38% for eligible dividends for taxation years ending after 2011, and 15% for other taxable dividends for years after 2018 laws-lois.justice.gc.ca. The federal credit sits in section 121: 6/11 of the eligible gross up and 9/13 of the non eligible gross up laws-lois.justice.gc.ca.

The 15.0198% and 9.0301% are the CRA's own figures in its T5 instructions, which state both the percentage of the taxable amount and the fraction of the gross up canada.ca. They're the same number expressed two ways: 6/11 of 38% is 20.7273% of the cash dividend, and dividing by 1.38 gives 15.0198% of the grossed up amount. Firm guides that round to 15.02% will drift by a few cents on large dividends.

The CRA's line pages still describe the 2025 return as of October 2026. Because the rates are fixed in the Act for every year after 2018, the same figures apply to 2026 dividends.

Ontario dividend tax credit for 2026

Ontario's credit is 10% for eligible dividends and 2.9863% for non eligible dividends, the rates that have applied from 2020 through 2026 ontario.ca.

Both rates apply to the grossed up amount. Worksheet ON428 takes line 12010 times 2.9863%, then line 12000 minus line 12010 times 10%, and the total goes on line 61520 of Form ON428 canada.ca.

The 2027 drop comes from the 2026 Ontario Budget, which cuts the non eligible rate from 2.9863% to 1.9863% effective January 1, 2027, to match the cut in Ontario's small business corporate rate from 3.2% to 2.2% on July 1, 2026 budget.ontario.ca. For a client in another province, use that province's Form 428 worksheet for line 61520. This page carries only the Ontario rows it could check against official sources.

Worked example: $10,000 of each type for an Ontario resident

Your client receives a $10,000 eligible dividend and a $10,000 non eligible dividend in 2026, both reported on T5 slips.

Check the federal figures both ways: $13,800 × 15.0198% = $2,072.73, and 6/11 × $3,800 = $2,072.73. On the non eligible side, $11,500 × 9.0301% = $1,038.46, and 9/13 × $1,500 = $1,038.46.

Line 12000 holds both types, which trips people up. It gets $13,800 plus $11,500, and line 12010 repeats the $11,500. The Ontario worksheet then backs the eligible part out: $25,300 minus $11,500 is $13,800, times 10% is $1,380, plus $343.42 on the non eligible part.

Now take the credits through to federal tax payable. The 2026 federal rates are 14% on taxable income up to $58,523 and 33% above $258,482 canada.ca. The table assumes the whole grossed up amount sits inside one bracket and shows the federal tax the dividend itself adds, before provincial tax.

The arithmetic: $13,800 × 14% = $1,932.00, less $2,072.73, leaves minus $140.73; $11,500 × 14% = $1,610.00, less $1,038.46, is $571.54. At 33%, $13,800 × 33% = $4,554.00 less $2,072.73 is $2,481.27, and $11,500 × 33% = $3,795.00 less $1,038.46 is $2,756.54. In the 14% bracket the eligible credit is bigger than the tax on the dividend, so the extra $140.73 reduces federal tax on your client's other income. Total federal tax still stops at zero, because section 121 only lets the credit come off tax otherwise payable, never create a refund laws-lois.justice.gc.ca.

Where each T5 box lands on the return

Box 25 goes on line 12000, box 11 goes on both line 12000 and line 12010, and boxes 26 and 12 are claimed on line 40425 through the Federal Worksheet canada.ca. The same mapping covers T3 boxes 32 and 50, T4PS boxes 25 and 31, and T5013 boxes 130 and 133 canada.ca.

No slip? Multiply the cash received by 138% for eligible dividends and by 115% for non eligible ones, and report the result on the same lines canada.ca. Foreign dividends don't qualify for the federal credit canada.ca.

Boxes 11, 12, 25 and 26 are filled in only for individuals resident in Canada, other than a trust that is a registered charity canada.ca. A nonresident shareholder's T5 shows the actual amount only. Payers file these slips by the date covered in the T5 slip deadline page.

Your client can report a spouse's or common law partner's dividends only if doing so creates or increases the spouse amount on line 30300, and those dividends then come off the partner's return canada.ca.

Designation, GRIP and the integration idea

A dividend is eligible only if the payer designates it, before or at the time it's paid, under subsection 89(14). A corporation can designate part of a dividend, and a late designation is possible within three years (six in some cases) if the minister finds it just and equitable canada.ca. For a CCPC, the room to designate comes from its general rate income pool, covered in the GRIP account page.

The gross up and credit exist to integrate corporate and personal tax. The gross up rebuilds roughly the pretax corporate income behind the dividend, and the credit hands back roughly the corporate tax already paid on it, so a shareholder ends up near the tax they'd have paid earning the income directly. That's why eligible dividends, paid from income taxed at the general rate, get the larger gross up and credit, while non eligible dividends from income taxed at the small business rate get less. Ontario states the same logic for its 2027 cut: the credit rate approximates the corporate rate paid, so a lower small business rate calls for a lower credit budget.ontario.ca.