WealthAfter-Tax Return Calculator 2026 (Canada)
After-tax return calculator by income type
| On your amount | Interest | Eligible dividend | Capital gain |
|---|
█ kept after tax ▨ estimated tax
For illustration only. Approximate combined (federal + provincial) marginal rates for 2026; the rate on your last dollar is applied to the whole investment amount. No $250,000 capital gains threshold is applied. Not tax advice and not a recommendation to buy or sell.
How the three income types are taxed
It all starts from the same combined (federal + provincial) marginal rate — the one for the bracket your income falls in. What changes is the share of income actually included in your taxable income, and the credit that applies afterward.
- Interest (GICs, bonds, savings accounts): fully taxable at 100% at your marginal rate. It is the most heavily taxed type of investment income.
Tax = amount × marginal rate. - Eligible Canadian dividend: the amount received is first grossed up by 38% to reconstruct the company's pre-tax profit. Gross tax is computed on that grossed-up amount, then reduced by the federal dividend tax credit (15.0198% of the grossed-up amount) and a provincial dividend tax credit that varies by province. The net result is an effective rate that is often low — and sometimes even negative at low incomes.
- Capital gain: only 50% of the gain is included in your taxable income (2026 inclusion rate), then taxed at your marginal rate.
Tax = gain × 50% × marginal rate— in practice, roughly half the tax on an equivalent amount of interest.
To stay simple and transparent, this calculator uses published combined marginal rates by income type (the "interest / eligible dividend / capital gain" columns of Canadian tax tables), which already bake in the gross-up and the credits. The dividend mechanics above are explained for context; the calculation itself applies the combined rate for your bracket.
Worked example: $1,000, Ontario, $70,000 income
Take $1,000 of investment income, in Ontario, with about $70,000 of taxable income (combined marginal rate for that bracket: ~30%).
- Interest: $1,000 × 29.65% ≈ $297 tax, leaving $703 net.
- Capital gain: $1,000 × 50% × 29.65% ≈ $148 tax, leaving $852 net.
- Eligible dividend: an effective dividend rate of about 6.4% at that bracket ≈ $64 tax, leaving $936 net.
Same "gross" $1,000 of return, yet more than $200 of difference in your pocket depending on the nature of the income. That is why, in a non-registered account, it often pays to shelter interest income (TFSA, RRSP) and keep capital gains and Canadian dividends outside.
Interest, dividends or gains: where to hold what?
The general "asset location" rule follows directly from these gaps. Because interest income is taxed at 100%, it is the first candidate to put inside a TFSA or an RRSP, where it is not taxed. Capital gains and eligible Canadian dividends, already tax-advantaged, can sit more comfortably in a non-registered account. Note: this logic only matters in a taxable account — inside a TFSA or RRSP, the income type has no tax impact at all.
Frequently Asked Questions
Why is a capital gain more tax-efficient than interest?
Because only half of a capital gain is taxable in Canada in 2026 (the 50% inclusion rate), while interest income is fully taxable at your marginal rate. Concretely, $1,000 of interest and $1,000 of capital gain are taxed at the same marginal rate, but the gain only adds $500 to your taxable income, so you pay roughly half the tax on the gain. That is why, at equal returns, a dollar of growth is worth more than a dollar of interest in a non-registered account.
Do foreign dividends get the dividend tax credit?
No. The dividend tax credit (and the 38% gross-up) applies only to dividends from taxable Canadian corporations — eligible dividends. A dividend from a U.S. or other foreign company is treated as ordinary income, fully taxable at your marginal rate, just like interest. Worse, a foreign withholding tax (often 15% in the U.S.) may apply, partly recoverable through the foreign tax credit. This calculator covers eligible Canadian dividends only.
What if my investment is in a TFSA or RRSP?
Then none of these calculations apply: inside a TFSA, growth and withdrawals are entirely tax-free, regardless of the type of income. In an RRSP, tax is deferred — nothing is taxed while the money stays in the account, then each withdrawal is taxed as ordinary income, with no distinction between interest, dividends or gains. The gap between the three income types only exists in a non-registered (taxable) account.
Are these rates exact for my situation?
These are approximate combined (federal + provincial) marginal rates for 2026, for illustration only. Your real rate depends on your exact tax bracket and credits, and the dividend tax credit can be partly non-refundable depending on your income. This calculation applies the marginal rate of your last dollar earned to the whole investment amount, a good approximation for a modest amount. For a real decision, confirm with a professional.
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