Dividend Income of spouse from a Taxable Canadian Corporation [Section 82 (3)]

It is usual that your spouse may receive the dividend income from a taxable Canadian Corporation. You may be entitled to report such dividend income on your income tax and benefit return (not the spouse) if the following conditions are satisfied:

1)      The dividend received by your spouse is from Taxable Canadian Corporation. By Taxable Canadian Corporation we mean a corporation which is liable to tax in the Canadian jurisdiction.

2)      You can report the dividend received by your spouse on your income tax return only when it increases your spousal tax credit and not otherwise. Spousal tax credit is a non-refundable tax credit that you can avail of on your tax return if your spouse income is below a limit prescribed. For the year 2017, such limit prescribed is $11,635.

3)      When the dividend received by your spouse is reported on your income tax return, you must as a necessary condition, report all the dividends received by your spouse from the Taxable Canadian Corporations and cannot pick and choose the dividend income to report on your income tax return.

4)      When the spousal dividend is reported on your income tax return, it must be grossed up and you would be entitled to a dividend tax credit with regard to such dividend income.  

5)      There is no special form to include such dividend income on your income tax return. While finalising your income tax return, you should check with your tax expert or accountant who files income tax return on your behalf.

6)      If your spouse has incurred a deductible interest expenses for earning such dividend income, it is not transferred to your income tax return but your spouse alone should use that tax deductible interest to offset any other such income.

7)      Further information can be obtained from Canada Revenue Agency’s (CRA) guide to Line 120-Taxable Amount of dividends from taxable Canadian corporations.

Disclaimer: Any discussion on this blog relating to tax matters is purely for educational purposes and not taking any specific actions based on the general tax rules described therein. Your tax situation could be different and as a result there may be different tax strategies applicable in your case. We do not claim the tax situations described above to be exhaustive or conclusive. In case of any specific tax situations or problems, you are advised to seek independent professional advice.