How should I pay myself this year?
– Dividends & Salary
Tip 1: Dividends
Prior 2014 it was beneficial to the business owners to pay dividends rather than a salary from their corporation, however, it was changed on non- eligible dividends regarding the dividend tax credit in the last year federal budget.
Non-eligible dividends in 2013 Federal Budget reduced the gross-up from 25% to 18%, corresponding, the federal non-eligible dividend tax credit reduced from 13 1/3% to 11.017% of the taxable dividend for the 2014 tax return and later years.
As an active business owner with no income other than taxable Canadian Dividends in 2014 approximately $35,551.00 could be earned before any federal taxes on your personal tax return which to compare in 2013 was $43,432.00. Although, when the taxpayers have high incomes, they have to pay little tax on their income. The exemption level for federal minimum tax is $40,000.00
As you may see the following table, the federal column for non-eligible dividends shows the amount of actual dividends that can be earned before regular federal tax is payable, if there is no income other than the dividends. For the BC provincial column shows the amount of actual dividends that you can be earned before any regular provincial income tax is payable.