What will be the net federal tax on Anne’s dividend income, given the tax parameters?

In the context of tax calculations, particularly for dividend income, it is important to understand how dividends are treated under the Canadian tax system. Dividend income is typically subject to gross-up and tax credit mechanisms that affect the effective tax rate on that income.

When calculating the net federal tax on dividend income, the initial step involves determining the grossed-up amount of the dividend, which increases the taxable income. After the gross-up, a dividend tax credit is applied. This credit effectively reduces the amount of tax owed, given that dividend income has been taxed at the corporate level before being distributed to shareholders.

In the case of Anne's dividend income, if the calculation results in a net federal tax of $52.98, this indicates that after applying the gross-up of the dividends and the appropriate tax credits, this is the amount that she is required to pay in taxes. The fact that the answer $52.98 aligns with the tax parameters, including any applicable dividend tax credits, reinforces its validity.

Understanding these calculations is critical because they vary based on factors such as the type of dividend (eligible vs. non-eligible) and the individual’s marginal tax rate. In this scenario, the tax has been correctly calculated to reflect the effective federal tax on Anne's