Glossary term
Gross-up
A dividend gross-up converts the cash dividend received into the taxable dividend amount used before dividend tax credits are applied.
Plain meaning
What gross-up means
Gross-up is a tax adjustment. For Canadian taxable dividends, the cash dividend received is increased by a stated percentage to calculate the taxable dividend amount reported in the tax calculation.
Formula role
How OpenBook uses it
Dividend calculators use gross-up as an intermediate step. They start with the cash dividend received, calculate the grossed-up taxable dividend amount, include that amount in taxable income where modelled, and then apply the dividend tax credit.
The gross-up rate differs for eligible dividends and non-eligible dividends.
Common confusion
Cash and taxable amount differ
A grossed-up dividend amount is not extra cash received. It is a tax-reporting amount used before the dividend tax credit is applied.
Primary references