T5 and T3 slips show grossed-up taxable amounts that exist only for Canadian tax. On your US return you report the actual dividends, from T5 box 24 and box 10, and T3 box 49 and box 23.
Lou is a tax-preparation tool, not a tax advisor. This article explains general rules for US citizens and green card holders who live in Canada. For advice on your situation, work with a qualified tax professional.
A Canadian dividend slip has several numbers that look right. Only some of them belong on a US return.
Why there is a grossed-up amount#
Canada grosses up dividends from Canadian corporations before taxing them, then gives a dividend tax credit. The gross-up is 38% for eligible dividends and 15% for other taxable dividends. The result is a larger "taxable amount" on the slip. It is a Canadian tax mechanism. It is not money you received.
What the US uses#
The US taxes the dividend you actually received. Use the actual amount, never the grossed-up taxable amount.
| Slip | Box to use | Meaning |
|---|---|---|
| T5 | Box 24 | Actual amount of eligible dividends |
| T5 | Box 10 | Actual amount of dividends other than eligible dividends |
| T3 | Box 49 | Actual amount of eligible dividends |
| T3 | Box 23 | Actual amount of dividends other than eligible dividends |
Do not use the taxable amount boxes (T5 box 25 and box 11), and do not treat the dividend tax credit boxes as income.
Common mistakes#
- Copying a taxable amount box onto the US return. That overstates your income by 38% or 15%.
- Treating the Canadian dividend tax credit as foreign tax paid. The credit is part of how Canada taxes the dividend.
- Ignoring T3 slips that come from a mutual fund. A fund can bring Form 8621 into the picture. See Is my Canadian mutual fund or ETF a PFIC?
Tax paid on dividends#
For the foreign tax credit, Lou uses the Canadian tax you actually owed for the year from your T1 or Notice of Assessment, split between income categories. The dividend slip alone does not give a tax figure. See the foreign tax credit guide.
Where Lou fits#
Lou reads T5 and T3 slips and uses the actual boxes above. If you only have a T1 return, Lou removes the gross-up (dividing by 1.38 or 1.15) to get the actual amount.
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