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T3 and T5 Dividends


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My wife runs her own company and pays her self diividends. When I complete our tax returns even though the dividends are entered correctly on her " interview" they show as zero her  summary and my tax owing jumps significantly. Why would the system allocate the dividends (income) to the higher tax payer? 

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First note the total tax paid by you and your spouse. The in your spouse's return, go down to the bottom of the menu to Controls. Set the Transfer of taxable dividends to Claim own amount. Now see what the combined tax payable is. Use the approach that leads to the lowest overall tax.

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It is important to understand that there are dividend transfers rules which allow a shift of dividends to an optimal amount between spouses. It's a very specific section in the Tax Act. It will result in overall less tax paid for spouses and the family group. Allication to the higher income taxpayer will use the dividend tax credit to its advantage instead of wasting it.

 

 

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