Katrina is 27 years old. During 2020 she receives a non-eligible dividend of $12,000 from a private company controlled by her mother. Because she has never been actively engaged in the business, has assumed no risk or contributed capital to the corporation, holds only non-voting shares, these dividends are classified as Split Income. In addition to the dividends, she has interest income of $6,000 on funds that she inherited when her grandmother passed away. Her only tax credits are the basic personal credit and the dividend tax credit. How much is her federal tax payable for the year?

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Katrina's split income is subject to the highest marginal tax rate, which is 33% federally. The non-eligible dividend of $12,000 is taxed at this rate, resulting in $3,960. The interest income of $6,000 is taxed at her marginal rate, which is 15% for the first $48,535, resulting in $900. Her total tax before credits is $4,860. After applying the basic personal credit ($1,984) and the dividend tax credit, her federal tax payable is approximately $3,308.

Katrina Is 27 Years Old