≡ Menu

Early Retirement on Dividend Income, which Province is the Best in 2018?

After my last financial freedom update, a few readers have asked me about dividend taxation.  This article will show the advantage of dividend income for the early retiree.  This post was originally written in 2016, but updated for 2018.

Every year when winter strikes in Newfoundland, my wife and I always ask the same question “what would it be like to live somewhere else?”.  While my wife and kids dream of enjoying a warm beach in Florida, my mind, on the other hand, wanders to jurisdictions with lower taxes and a lower cost of living.

It’s unlikely that we’ll change provinces while the kids are in grade school, but it’s possible once they reach post-secondary education.  Thinking ahead 10-11 years from now, both kids will be underway in their post-secondary pursuits, and our dividend portfolios should be a substantial size and more than enough to support our lifestyle (unless I get that Ferrari ;)).

When we do decide to call it quits from regular salaried work, our tax picture will change substantially.  Not only will our income tax change from salaried income to investment income, but our taxes owed will also vary depending on which province we live in.

Dividend Taxes by Province

Let’s look at varying dividend income scenarios. Assuming that my wife and I split the income, what would our taxes look like in different provinces?

Using an online tax calculator, I ran some numbers and this is what I came up with for taxes owing. Note that I’m assuming 2018 tax rates, no additional deductions besides the basic personal amount, and eligible dividends are our only income source.

 Province$40,000$50,000$60,000$70,000 $80,000 $100,000 $120,000 $140,000
 NL$213$668$1,643$2,899$4,395 $7,466 $14,457 $20,974
 NS$0 $0$0$475 $1,389 $3,557 $9,415 $15,273
 PE$0 $0$0$0 $0 $589 $5,937 $11,289
 NB$0 $0$0$0 $0 $0 $3,626 $7,262
 QE$1,447$1,547 $1,641 $1,641 $1,817 $2,941 $8,543 $14,334
 ON$600$600$900$1,050$1,200 $1,200 $4,648 $8,023
 SK$0$0$0$0 $0$0 $3,483 $7,041
 MB$0$9$665$1,320$1,976 $3,304 $9,381 $15,533
 AB$0 $0$0$0$0$0 $3,175 $6,566
 BC$0 $0$0$0$0$0 $3,148 $6,524
 NT$-1,014$-1,187-$1,359-$1,530 -$1,668 -$1,884 $1,496 $4,998
 NU$-1,014$-1,380-$1,656-$1,932 -$2,208 -$2,400 $980 $4,482
 YT $0 $0$0$0 $0$0 $3,332 $6,808

Running these numbers came with a number of surprises, namely the low taxation of dividends in the territories and New Brunswick, and also that Newfoundland charges so much more for dividend income on bigger non-registered portfolios.  I also find it quite impressive that a couple can make up to $100k in dividend income and pay $0 in taxes in highly populated provinces like BC and Alberta.

Dividend taxes start to pick up when approaching $120k in dividend income (between two people).  However, to put things in context, $120k dividend income would require a $3.4M portfolio invested mostly in dividend stocks (assuming 3.5% yield).

For aspiring investors looking at super early retirement (30’s and 40’s), their expenses are usually very low in the $30k-$45k/year range with dividend portfolio sizes in the range of $800k to $1.2M.  Living in any province with $30-$45k taxable dividend income would result in very little tax payable – if any at all!

As previously mentioned, looking forward 10 years or so, I imagine that our financial picture will be different than today.  We recently hit $43k in dividend income, which is steadily approaching our $60k goal in a couple years.  Once that goal is reached, it’s possible that in 10 years, our dividend income could approach $100k.  At that level, considering weather, lifestyle, and family, it looks like Ontario and BC are attractive options.

Final Thoughts

In the grand scheme of things, there are very few early retirees in their 30’s and 40’s and even fewer who retire on solely dividend income.  It is much more likely that there will be multiple sources of income with different taxation levels.  I imagine that people who achieve financial freedom at a young age continue to grow and work on projects – at least I know it will be for me.

Having said that, it’s still fun to imagine kicking up your shoes, doing what you want, and paying very little tax.

-> If you would like to read more articles like this, you can sign up for my free newsletter service below (we will not spam you).

FT About the author: FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 40 comments… add one }
  • SST January 11, 2016, 11:32 am

    You had better be getting $100k in dividends if you’re considering B.C. — B(ring) C(ash).

    All the retirement hotspots (and Lower Mainland) are insanely priced and the rest of the province gets typical Canadian winter weather.

    Consider foreign options.

    • FT FrugalTrader January 11, 2016, 1:15 pm

      Good point SST. Do you have any favourite foreign options?

      • Justin October 2, 2018, 10:09 am

        Unless you look in the Windsor-essex county area. The Florida on Canada. Home prices very reasonable compared to rest of southern Ontario.

  • crashten January 11, 2016, 1:58 pm

    Too bad you added weather to your list of considerations… otherwise Saskatchewan could part of your retirement dream based upon that chart above. Just remember, those of us in the prairies are fond of a particular saying (mostly to rationalize why we live here each winter) that I’ll put it out there for you to consider. Remember, “it’s a dry cold.”

    • FT FrugalTrader January 11, 2016, 2:15 pm

      Is “dry” cold a good thing?

      • yettie January 11, 2016, 4:50 pm

        Speaking as a Nigerian who moved to Canada recently and has lived in NL and AB, “dry cold” is a GREAT thing.

        Living in St John’s the winter temperatures seemed moderate but the high humidity means the cold gets into your bones very quickly. Not so in Calgary. The discomfort of Calgary at -25C is equivalent to the discomfort of St John’s at -10C in my opinion

        • FT FrugalTrader January 11, 2016, 8:08 pm

          Thanks for the perspective. I spent a winter in Ottawa and recall experiencing a different kind of cold than NL. I recall being told to make sure to cover my skin or else it will freeze!

          • Pierre January 12, 2016, 12:37 am

            Having moved from Montreal to Calgary 18 months ago I can attest to the “dry cold” thing… Also Chinook winds can make southern Alberta surprisingly warm in winter: https://en.wikipedia.org/wiki/Chinook_wind

            Last year we had <5 days below -20C, most days it went at least above freezing for a few hours :)

            Great information as always, thanks!

          • Brent October 13, 2018, 5:50 pm

            Thanks for the great article (as usual!)
            Any chance you’ll revisit your previous article on non-eligible dividend income? Specifically in light of the recent tax changes for TOSI?
            We created a corporation using family savings, my wife and I being the shareholders (49/51). Would like to split any dividends proportionately.
            Not sure how to interpret the rules now…

          • FT FT October 14, 2018, 4:01 pm

            Thanks for the kind feedback Brent! This article may help you:

            https://www.milliondollarjourney.com/income-sprinkling-rules-for-canadian-small-business.htm

  • Bernie January 11, 2016, 2:10 pm

    We also live in NL, and we talk often about living somewhere else. With a primary school child it will likely happen later, if at all. If Oil doesn’t rebound in a couple of years, the debt of this province will be such a burden on the minority of tax payers, that leaving may become a more attractive option.

    • FT FrugalTrader January 11, 2016, 2:16 pm

      Hi Bernie, I hear ya! I feel the same way about the coming debt burden and the inevitable rise in taxes. I’m in wait and see mode!

  • Dividends on the Prairies January 13, 2016, 4:21 pm

    Great article. It was nice to see our province (SK) in the running for the lowest taxes. But yes, the long winters are still a problem!
    I’m assuming that this table only works if your nest egg (which is producing the dividends) is entirely non-registered (not RRSPs or pension money) because otherwise you’d have to worry about withdrawal rules etc that comes with registered money?

    • FT FrugalTrader January 13, 2016, 4:23 pm

      That is correct, it assumes either non-registered or TFSA dividend withdrawals. As you said, RRSP withdrawals are taxable as income.

  • Sasha January 15, 2016, 10:48 am

    come to Ontario baby, buy a condo in downtown Toronto and call it a day.

  • Formative Fortunes January 16, 2016, 12:18 pm

    BC is beautiful and if you can make 100k on dividends income and not pay taxes living in a beautiful area i dont think there is a better choice. Good luck growing the passive income!

  • D2cold January 16, 2016, 8:46 pm

    Don’t forget its only Canadian dividends too as US div is considered as regular income and may likely screw up your above scenario. I ran this screen years ago for fun and BC is my first choice. Probably not Vancouver but within an hour or so from Kelowna. Better weather and less rain. Not to take away from your site but taxtips.ca is a fantastic site for our tax info.

    • FT FrugalTrader January 17, 2016, 5:33 pm

      Good point D2cold. Are you also a dividend investor working towards early retirement?
      And yes, I agree with your taxtips.ca recommendation, use them all the time.

      • D2cold January 17, 2016, 5:58 pm

        Dividends not so much. I look for anything that has the best growth, including dividends. I just thought it was a neat exercise to try and make a “safe and diversified” portfolio of only Canadian dividend paying companies.

  • BeSmartRich January 22, 2016, 5:38 pm

    Alberta and BC killed it. Ontario isn’t too bad but considering our targeted dividend income is around $50-70K, living in my second hometown Nova Scotia isn’t doing too bad in that range. Good summary. Thanks as always!

    BeSmartRich

  • Wayne January 25, 2016, 6:10 pm

    FrugalTrader.
    Favourite foreign destination – Costa Rica. First class health care. Lived there over several months.
    http://retireforlessincostarica.com/newsletter-june-25-2013/

  • Tom Drake January 27, 2016, 7:05 pm

    I look forward to welcoming you to Alberta, see you in a few years! ;)

  • Trent January 31, 2016, 2:07 pm

    FrugalTrader. Just wanted to give you the heads up that once you go over 40K + federal personal tax credit (of just over 10K) of actual dividend income (not grossed up) you would be subject to the AMT if the federal liability is nil.

  • DAvid March 29, 2016, 10:55 pm

    The cost of living in smaller town BC can be much cheaper than in the large centres, and in my experience, anywhere in southern BC sees much nicer weather than I experienced during my years in St. John’s. If it works for you, make the move; I doubt you’ll regret it.

    DAvid

  • FT FrugalTrader March 30, 2016, 8:49 am

    Hi DAvid! Good to hear from you, always nice to hear from readers who have been around for a while. I’ve heard that the weather in BC is among the nicest in Canada! Do you have any recommendations on towns/cities in BC that have great weather, but affordable?

    • DAvid March 30, 2016, 1:17 pm

      There are so many small towns up-island on Vancouver Island, or in the interior of BC, south of Kamloops, that narrowing it down becomes a challenge. It also depends how large a community you want to live in. Some that stand out to me include: Salmon Arm, Vernon, Osoyoos, Penticton, in the Okanagan Valley; Nelson, Creston, Kimberley in the Kootenays, and towns surrounding Nanaimo on Vancouver Island.

  • Al August 5, 2016, 3:25 am
  • Leo T. Ly October 1, 2018, 10:00 am

    For a couple, if you live in Canada for most of your adult life and had been working and contributing to CPP, once you reached 65, you and your spouse can get up easily get $15k to $20k in OAS and CPP payments per year as a couple. That can be a healthy amount to add on top of your dividend income.

  • John October 1, 2018, 3:58 pm

    How can you and your wife split the dividend income in your 30’s and 40’s – Does that assume both have to own 50% of the total investments under their name?

    At what age can a person start splitting income?

    • FT FT October 2, 2018, 8:55 am

      Hi John, it really depends on how you set up your discount brokerage accounts. If they are joint non-registered accounts, then you can split the taxes, the key is that you keep it consistent year after year.

  • GYM October 2, 2018, 4:25 am

    Come to BC! It’s warm here and food is good! :)

    Not necessarily “Bring Cash” if you opt for the smaller towns. Some nice areas in the Okanagon that are great- wine country!

    • FT FT October 2, 2018, 8:54 am

      Thanks GYM, how did you know that food would attract me to BC? :)

      Do you know which town/cities in BC offer the best overall value (weather, cost of living, raising kids etc)?

  • Jonathan October 2, 2018, 7:57 pm

    Sooke! It’s the perfect place to live.

    • FT FT October 2, 2018, 8:40 pm

      Lol, I’m betting most ppl don’t understand what ‘sooke’ means . :). We don’t live here for the weather thats for sure .

  • Mac | Personal Finance Blog October 24, 2018, 4:15 pm

    Thanks for this article and the fresh perspective. Glad to see some of the provinces named here are our personal favorites too. The numbers don’t look too scary too. Low taxes dividends can help you live a comfortable retirement life and enjoy without worrying too much about the money or taxes.

  • Senior Crown October 26, 2018, 8:02 pm

    If you are worried about cold weather, just visit Germany. Very few days below -7° and moderate temperatures all over the year.

    Price to pay : 27% tax on dividends , all of them, from the first $ .
    It´s unbelievable , but the explanation why 95% of all FIRe Blogs come from the Americas.
    To be fair, healthcare and education is cheaper.

    Greetings to Canada
    SC

    • Ivor November 16, 2018, 3:17 am

      Twenty seven percent on dividend income from the first dollar? Wow.

  • Dale Roberts October 29, 2018, 7:37 am

    Thanks FT, I will start following your site more closely. And I will certainly link to some of your work, and again, follow your journey to financial independence. I have submitted the follow information as well. What a great example you provide. It’s all quite simple stuff to build wealth at an incredible rate. Live well below your means (save), invest wisely, pay down debt (pay off debt). I recently left the fulltime job I loved (Tangerine Advisor and Trainer). I ‘semi-retired’. We have no mortgage, no car debts. But my portfolio is smallish, I will need to earn half a living. btw love the East Coast. I set up shop on PEI for 3 weeks in July. I was just there recently for another 10 days. All the best, I’ll be watching and adding my 2 cents.

    • FT FT October 29, 2018, 3:19 pm

      Thanks for the kind feedback Dale!

Leave a Comment