T5 Investment Income: Dividends, Interest & Foreign Income

Key T5 Boxes Explained

Box 10 - Actual Amount of Dividends (Other Than Eligible)

Non-eligible dividends from Canadian corporations, typically from small businesses (CCPCs) that pay the small business tax rate.

CRA Line: Report on Line 18000

Box 11 - Taxable Amount of Dividends (Other Than Eligible)

The grossed-up amount of non-eligible dividends. For 2024, non-eligible dividends are grossed up by 15%.

Example: $1,000 actual dividend = $1,150 taxable amount

Box 12 - Dividend Tax Credit (Other Than Eligible)

The federal dividend tax credit for non-eligible dividends. For 2024, this is 9.03% of the taxable amount (Box 11).

Box 13 - Interest from Canadian Sources

Interest income from bank accounts, GICs, bonds, and other Canadian interest-bearing investments.

CRA Line: Report on Line 12100

Note: Interest income is taxed at your full marginal rate with no special treatment.

Box 24 - Actual Amount of Eligible Dividends

Eligible dividends from Canadian public corporations and private corporations that pay the general corporate tax rate.

Box 25 - Taxable Amount of Eligible Dividends

Grossed-up amount of eligible dividends. For 2024, eligible dividends are grossed up by 38%.

Example: $1,000 actual dividend = $1,380 taxable amount

Box 26 - Dividend Tax Credit for Eligible Dividends

The federal dividend tax credit for eligible dividends. For 2024, this is 15.02% of the taxable amount.

Understanding the Dividend Gross-Up and Tax Credit

The dividend gross-up and tax credit system is designed to prevent double taxation:

1. Gross-up: Your dividend is increased to approximate pre-tax corporate income
2. Tax credit: You receive a credit representing taxes the corporation already paid
3. Net effect: You're taxed at roughly the same rate as if you'd earned the income directly

Eligible vs Non-Eligible Dividends Comparison

Interest Income Reporting

Unlike dividends, interest income receives no preferential tax treatment:

• 100% of interest is added to your taxable income
• Taxed at your full marginal rate
• Must be reported even if you didn't receive a T5 (if under $50)

Foreign Income on T5 Slips

Box 15 - Foreign Income

Foreign income that was paid to you through a Canadian intermediary (like a mutual fund).

Box 16 - Foreign Tax Paid

Foreign withholding tax already deducted. You may be able to claim this as a foreign tax credit on Line 40500.

When You Won't Receive a T5

You won't get a T5 for investment income earned inside:

• RRSP/RRIF accounts (tax-deferred)
• TFSA accounts (tax-free)
• RESP accounts (special rules apply)
• FHSA accounts (tax-free for qualifying withdrawals)

This is why holding interest-bearing investments inside TFSAs is tax-efficient!

Accrued Interest on Bonds

If you hold bonds directly (not in a mutual fund), you may need to report accrued interest annually, even if you haven't received payment. This is called the "anniversary day" rule.

Calculating Your Dividend Tax

Here's how dividend taxation works in practice (Ontario example, 2024):

Eligible Dividend Example

• Actual dividend received: $1,000
• Grossed-up amount: $1,380 (Box 25)
• Federal tax (at 29%): $400.20
• Federal dividend tax credit: -$207.28
• Provincial tax (Ontario): varies
• Provincial dividend tax credit: varies
• Effective tax rate: approximately 25-35% depending on income

Common T5 Mistakes to Avoid

• Forgetting small amounts: Report interest even without a T5
• Double-counting: If you own funds in a non-registered account, the fund issues the T5, not you
• Missing foreign tax credits: Check Box 16 for claimable foreign taxes
• DRIP confusion: Reinvested dividends are still taxable in the year received

Key Takeaways

• Eligible dividends are taxed more favourably than non-eligible dividends
• Interest income is taxed at your full marginal rate
• The gross-up and tax credit system prevents double taxation
• Report all investment income, even if you didn't receive a T5
• Investment income in registered accounts (TFSA, RRSP) doesn't generate T5 slips