2017 British Columbia Marginal Tax Rates

How much you pay in income taxes in B.C. will depend on how much you make and how you make your money.  The most taxed earnings will be derived from labour, followed by capital gains or dividends depending on your marginal tax bracket.  British Columbia is the best province to reside in if you make the majority of your income from eligible dividends from Canadian companies.  You can collect $122,332.45 in dividends before you start paying income tax at the provincial level.
    On regular income you can pay up to 47.7% in combined income taxes at the top marginal tax rate, which would mean you would need to earn $1.91 to net a dollar.




2017 Provincial Marginal Tax Rates in British Columbia

Taxable Income

Tax Rate

$1 After Tax Earnings

Amount Needed to Net a $1

Dividend Tax Rate

Capital Gains Tax Rate

first $38,898

5.06%

$0.949

$1.053

-6.82%

2.53%

over $38,898 up to $77,797

7.7%

$0.923

$1.083

-3.17%

3.85%

over $77,797 up to $89,320

10.5%

$0.895

$1.117

0.07%

5.25%

over $89,320 up to $108,460

12.29%

$0.877

$1.140

3.16%

6.15%

over $108,460

14.7%

$0.853

$1.172

6.49%

7.35%


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Basic Personal Amount: Your first $10,208 in earnings are exempt from provincial income taxes in B.C. for 2017.
Capital Gains: Taxable income derived from capital gains will be reduced by half, making an effective marginal tax rate on capital gains that is 50% of your current marginal tax rate.  For example, if you have $10,000 in capital gains, you would have $5,000 in taxable income from your capital gains.



2017 Combined Federal and Provincial Marginal Tax Rates in British Columbia

Taxable Income

Tax Rate

$1 After Tax Earnings

Amount Needed to Net a $1

Dividend Tax Rate

Capital Gains Tax Rate

first $38,898

20.06%

$0.799

$1.251

-6.84%

10.03%

over $38,898 up to $45,916

22.7%

$0.773

$1.294

-3.2%

11.35%

over $45,916 up to $77,797

28.2%

$0.718

$1.393

4.39%

14.1%

over $77,797 up to $89,320

31%

$0.69

$1.45

8.25%

15.5%

over $89,320 up to $91,831

32.79%

$0.672

$1.488

10.72%

16.4%

over $91,831 up to $108,460

38.29%

$0.617

$1.620

18.31%

19.15%

over $108,460 up to $142,353

40.7%

$0.593

$1.686

21.64%

20.35%

over $142,353 up to $202,800

43.7%

$0.563

$1.776

25.78%

21.85%

over $202,800

47.7%

$0.523

$1.912

31.3%

23.85%


Federal Personal Amount: Your first $11,635 in earnings are exempt from Federal taxes in 2017.


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Tax on Eligible Dividends in B.C.

Eligible Canadian dividends that you have received will be grossed up by 38%.  You will also be given a 10% provincial dividend credit as well as a 15.0198% federal dividend tax credit on your grossed up dividends.
    Someone that has a $30,000 annual salary and has been paid $2,000 in dividends in a non-registered account will have an effective provincial tax rate of -6.82% on their dividends that they have received.  The rate is lower, because corporate taxes has already been paid on the company's earnings.
    Someone that has a $30,000 annual salary and has been paid $2,000 in dividends in a non-registered account will have a total tax rate of -6.84% on their dividends that they have received.  The combined federal and provincial tax rate on dividends received would be (($1 x 1.38 x 20.06%) - ($1.38 x 25.0198%))/$1 = -6.84% at this bracket.

How the math works;

  • first off your $2,000 in dividends will increase your taxable income by ($2,000 x 1.38) = $2,760
  • You will get a dividend tax credit of ($2,760 x 10%) = $276
  • You will be taxed on your $2,760 at 5.06% and will have your taxes reduced by $276
  • This works out to ($2,760 x 5.06% - $276) = -$136.34 in net taxes on your dividends
  • The effective tax rate would be (-$136.344/$2000) = -6.82%

For the other tax brackets, we will assume that you are getting paid $2,000 in dividends to keep the calculations simple.

  • At the second bracket the tax on dividends paid would be ($2,760 x 7.7% - $276)/$2,000 = -3.17%
  • At the third bracket the tax on dividends paid would be ($2,760 x 10.5% - $276)/$2,000 = 0.07%
  • At the fourth bracket the tax on dividends paid would be ($2,760 x 12.29% - $276)/$2,000 = 3.16%
  • At the top bracket the tax on dividends paid would be ($2,760 x 14.7% - $276)/$2,000 = 6.49%

Credit Card Nerd Math

Someone that collects $78,594.20 in dividends with no other income to report would not need to pay a cent in provincial income tax in B.C.  The $78,594.20 will be grossed up to ($78,594.20 x 1.38) = $108,460.  You will receive ($108,460 x 10%) = $10,846 in provincial dividend tax credits.
    You will pay ($28,690 x 5.06%) + ($38,899 x 7.7%) + ($11,523 x 10.5%)+ ($19,140 x 12.29%) - ($10,846) = -$2,836.86 in income taxes.
    The point in which you will be tax neutral in B.C. for the provincial income tax purposes is $120,226. (extra dividends x 6.486% tax on dividends paid - $2,836.863 = 0%) therefore, (extra dividends x 6.486% = $2,836.863) and (extra dividends = $43,738.25).  Total dividends that can be collected tax free in B.C. at the provincial level is ($78,594.20 + $43,738.25) = $122,332.45,  a dividend collector's paradise.  At the federal level the point in which you are tax neutral on dividends is $56,470.04.


Provincial Tax Rates: https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html
Federal Tax Rates: http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html
Federal Dividend Tax Credit: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns409-485/425-eng.html