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Hands calculating with adding machine (Comstock/Getty Images/Comstock Images)

Ask An Adviser

Are dividend earnings in an RRIF taxable? Add to ...

Dear Nancy,

I would appreciate knowing whether dividend earnings from dividend stocks or coupons from preferred shares in a RRIF are taxable? Or are these earnings taxed together with whatever is withdrawn from the capital to arrive at the minimum withdrawal required by the government /per year?

In a non-RRSP account, the dividends are topped up for tax purposes.

Would this increase a senior’s income and cause a negative impact to the OAS if the income is more than $68,000?

Thank you so much! Rose

Dear Rose,

Any income, growth or loss that occurs within an RRIF does not have a taxable event. It is when any funds are deregistered from the account that you are required to declare as income. Your plan provider will issue you a tax slip for the deregistered amount to include with your income tax return.

There is a minimum amount that you can deregister from the RRIF, under government rules. You can withdraw more than the minimum amount at any time.

Whether the funds that you withdraw are part of the original capital, income or growth is irrelevant. The total amount withdrawn is taxed 100 per cent as income to you.

The dividend does have a gross up and then the dividend tax credit is applied to that grossed up amount.

For 2011,15 cents of the Old Age Security (OAS) is clawed back for every dollar of net income above $67,668. The full amount of the OAS is eliminated when you have a net income of $109,607 or higher.

Nancy Woods, CIM, FCSI, is an associate portfolio manager and investment adviser with RBC Dominion Securities Inc. To ask her a question, send an e-mail to asknancy@rbc.com or visit her web site at nancywoods.com


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