Individuals in the 25% or higher tax bracket pay a 20% tax on long-term capital gains. Those in lower brackets pay a 10% tax on their long-term capital gains.Short-term capital gains are taxed as ordinary income. And all individuals must pay their income tax rate on dividend income. In Canada, residents pay half of their marginal tax rate on capital gains. Dividends also get preferential treatment, though it may not seem that way. The taxable rate for dividend income is 125%, and Canadians must pay their marginal income tax rate. But national and provincial credits can help offset a taxpayer’s liability. Suppose a Canadian in the 25% tax bracket receives $10,000 in dividends for the year that are grossed up to $12,500. The initial tax liability is $3,125. A 5% provincial tax credit cuts that amount by $625, and a 13% federal credit reduces it by $1,666.25. The tax liability is $833.75, or 8.3% of the dividend income.