Solved: I have a question about Schedule 4

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New Member

I have a question about Schedule 4

Hello. I entered interest income of $2.47 and dividend income of $2.00. On Schedule 4 it is showing interest income of $2.47 and dividend income of $2.76. Can you please explain how it picked up an additional $.76 of dividend income?
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New Member

I have a question about Schedule 4

Yes.  This presumes that $2.00 was the actual amount of dividend income...this is then grossed up, by 138%, and that is the taxable amount of dividends.  So $2.00 becomes $2.76.  The reason for this is dividend income is post tax income paid out from corporations to the shareholders.  The gross up method is meant to report the income at the pretax amount, however there is also a dividend tax credit which is meant to help offset the tax, as this was already paid by the corporation.  The dividend tax credit does not exactly offset the increased tax liability, but it's close.  It does make dividend income a favourable source of income, in that it is not taxed as highly as other sources of income.

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Highlighted
New Member

I have a question about Schedule 4

Yes.  This presumes that $2.00 was the actual amount of dividend income...this is then grossed up, by 138%, and that is the taxable amount of dividends.  So $2.00 becomes $2.76.  The reason for this is dividend income is post tax income paid out from corporations to the shareholders.  The gross up method is meant to report the income at the pretax amount, however there is also a dividend tax credit which is meant to help offset the tax, as this was already paid by the corporation.  The dividend tax credit does not exactly offset the increased tax liability, but it's close.  It does make dividend income a favourable source of income, in that it is not taxed as highly as other sources of income.

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