How I Chose Between Dividend Stocks and GICs Using the Dividend Tax Calculator

My situation

I'm in Ontario with about $85,000 in employment income. I had $20,000 in a non-registered account that I wanted to invest for income. I was torn between buying Canadian dividend stocks (eligible dividends from large public companies) and locking in a GIC at 5%. I knew dividends were taxed more favourably than interest in Canada, but I didn't know by how much for my situation.

Using the calculator

I found TrackMoola's Dividend Tax Credit Calculator and entered my province (Ontario), my annual employment income ($85,000), and the amount I wanted to compare ($20,000) as the "investment income amount." The tool instantly showed me three columns: Eligible Dividends, Non-Eligible Dividends, and Interest Income.

What the numbers showed

For $20,000 of eligible dividends, my net after tax was about $18,200—an effective tax rate of around 9%. For the same $20,000 as interest income (like from a GIC), my net after tax was about $14,100—an effective rate of about 29.5%. That's a difference of over $4,000 in my pocket. The calculator also showed non-eligible dividends (from small business corps) landing in between. The detailed breakdown table showed the gross-up, taxable amount, gross tax, and dividend tax credits so I could see exactly how the credits reduced my tax.

My decision

I used the How-To Guide to confirm what "eligible" vs "non-eligible" means and how to find that on my T5 slip. I allocated most of my non-registered money to Canadian dividend ETFs that pay eligible dividends, and kept a smaller portion in a GIC for stability. The calculator didn't give investment advice—it gave me the tax comparison so I could decide. I'm not liable for your choices; this is educational only.

Try it yourself

Your province and income level change the result. Use the Dividend Tax Credit Calculator with your numbers and read our step-by-step guide to understand each field. This tool is for educational purposes only; consult a tax or financial advisor for advice tailored to you.