2020 Newfoundland Marginal Tax Rates

How much you pay in income taxes in Newfoundland 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.
    Newfoundland is the most taxed province when it comes to receiving Canadian eligible dividends, but you will still be able to receive over $17,000 in dividends tax free if you have no other taxable income.


Credit Card Nerd Math

Below we have two charts with the marginal tax rates, the amount of after tax earnings for every dollar earned ($1 - $1 x Tax Rate), the amount needed to take home a dollar ($1 ÷ After Tax Earnings), the tax rate on Canadian eligible dividends and the capital gains tax rate.



2020 Provincial Marginal Tax Rates in Newfoundland

Taxable Income

Tax Rate

$1 After Tax Earnings

Amount Needed to Net a $1

Dividend Tax Rate

Capital Gains Tax Rate

first $37,929

8.7%

$0.913

$1.095

4.55%

4.35%

over $37,929 up to $75,858

14.5%

$0.855

$1.170

12.56%

7.25%

over $75,858 up to $135,432

15.8%

$0.842

$1.119

14.35%

7.9%

over $135,432 up to $189,604

17.3%

$0.827

$1.209

16.42%

8.65%

over $189,604

18.3%

$0.817

$1.224

17.8%

9.15%


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Basic Personal Amount: Your first $9,498 in earnings are exempt from provincial income taxes in Newfoundland for 2020.
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.



2020 Combined Federal and Provincial Marginal Tax Rates in Newfoundland

Taxable Income

Tax Rate

$1 After Tax Earnings

Amount Needed to Net a $1

Dividend Tax Rate

Capital Gains Tax Rate

first $37,929

23.7%

$0.763

$1.311

4.53%

11.85%

over $37,929 up to $48,535

29.5%

$0.705

$1.418

12.53%

14.75%

over $48,535 up to $75,858

35%

$0.65

$1.538

20.12%

17.5%

over $75,858 up to $97,069

36.3%

$0.637

$1.570

21.91%

18.15%

over $97,069 up to $135,432

41.8%

$0.582

$1.718

29.5%

20.9%

over $135,432 up to $150,473

43.3%

$0.567

$1.764

31.57%

21.65%

over $150,473 up to $189,604

46.3%

$0.537

$1.862

35.71%

23.15%

over $189,604 up to $214,368

47.3%

$0.527

$1.898

37.09%

23.65%

over $214,368

51.3%

$0.487

$2.053

42.61%

25.65%


Federal Personal Amount: For most Canadians, the first $13,229 in earnings are exempt from Federal taxes in 2020, but if you earn $150,473 or more, the basic amount is reduced.  It is reduced when you earn between $150,473 and $214,368.  If you earn more than $214,368 in taxable income, your basic personal amount would be $12,298. The maximum reduction of your basic personal amount will cost you an extra $139.65. The basic personal amount changes the second highest federal tax bracket from 29% to 29.22%.


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Tax on Eligible Dividends in Newfoundland

Eligible Canadian dividends that you have received will be grossed up by 38%.  You will also be given a 5.4% provincial dividend credit as well as a 15.0198% federal dividend tax credit on your grossed up dividends.
    Someone that has an annual salary that is less than $37,929 will have a net marginal tax rate on their dividends of 4.55%.
    The provincial tax rate on dividends received is (($1 x 1.38 x 8.7%) - ($1.38 x 5.4%))/$1 = 4.554% at the first bracket..

How the math works;

  • first off your $1 in dividends will increase your taxable income by ($1 x 1.38) = $1.38
  • You will get a dividend tax credit of ($1.38 x 5.4%) = $0.07452
  • You will be taxed on your $1.38 at 8.7% and will have your taxes reduced by $0.07452
  • This works out to ($1.38 x 8.7% - $0.07452) = $0.04554 in net taxes on your $1 of dividends
  • The effective tax rate would be 4.55% on dividends received

For the other tax brackets, we will assume that you are getting paid $1 in dividends to keep the calculations simple.

  • At the second bracket the tax on dividends paid would be ($1.38 x 14.5% - $0.07452) ÷ $1 = 12.56%
  • At the third bracket the tax on dividends paid would be ($1.38 x 15.8% - $0.07452) ÷ $1 = 14.35%
  • At the fourth bracket the tax on dividends paid would be ($1.38 x 17.3% - $0.07452) ÷ $1 = 16.42%
  • At the top bracket the tax on dividends paid would be ($1.38 x 18.3% - $0.07452) ÷ $1 = 17.8%

Dividend Tax Neutral Number

Newfoundland is the worst province to earn dividend income, but that shouldn't stop you from collecting dividends.  You can earn over $17,000 in dividend income and pay no tax if it is your only source of income.
    First off, we will need to determine how much tax you would pay before the dividend tax credit.  The tax would be (1.38 gross up x $17,000 Dividends Received - $9,498 personal amount) x 8.7% = $1214.69 in provincial taxes.  The tax credit on $17,000 worth of dividends would be (1.38 x $17,000 x 5.4%) = $1266.84.


Provincial Tax Rates: Provincial Tax Rates 2020
Newfoundland and Labrador Personal Tax Credits 2020
Federal Tax Rates: Federal Tax Rates 2020
Federal Dividend Tax Credit: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns409-485/425-eng.html