[Light]

Great Place! new member here seeking some help.

I've done some research and according to that in BC the tax on eligible dividend income is much lower than everywhere else in Canada. Lets say I move to BC and start earning $60,000 from dividends as income and live on that.

What would happen if I move to Toronto as a student at a University? Would I start incurring higher taxes in Ontario? Would being a student help my tax rate? Is there a way to keep BC as my permanent resident place and Ontario as temporary? Is there such thing in Canada?

 

[OhGreatGuru]

a) If you were earning $60K in dividend income I'm sure your financial advisor would be willing to give you tax advice.
b) The "much lower than" is likely an exaggeration in the overall scheme of things, since the federal taxes would not be affected, and federal income tax is about twice provincial income taxes.
c) To your purely hypothetical question, the answer is maybe. Nominally you have to file taxes for the province where you are resident on Dec.31. There is an exception for university students if they still have "Residential Ties" with their home province.
These ties include where your home owned or leased and personal property are, and where your spouse or common-law partner or dependants reside. Other ties that may be relevant include social ties, a driver's licence, bank accounts or credit cards, and provincial or territorial hospitalization insurance. For more details, see Interpretation Bulletin IT221R3, Determination of an Individual's Residence Status.
However if you were a full-time student you would probably break a few provincial laws if you didn't transfer your vehicle registration, driver's license, and hospitalization insurance to the province where you attend university. So unless you were living at home with your parents in the summer (unlikely if you have investment earning $60K dividends); or owned a permanent residence in BC (again unlikely if you put your money in stocks and going back to school instead of a mortgage), you might have problems qualifying for "residential ties". The rules are not set up to create tax havens between provinces.

 

[Robillard]

For an individual with income between $40,727 and $81,452, the marginal tax rate on eligible dividend income in BC after taking into account provincial and federal dividend tax credits is -0.4%, compared to 7.0% in Ontario. Of course, the actual average tax rate one pays will depend on a variety of factors.

If your income is over $81,452, Alberta has the lowest effective marginal tax rate on dividends, primarily because of its flat income tax structure.

As for your other questions Light, so much depends on situational factors. Being a student normally lowers your taxes because you're spending most of your time studying rather than earning taxable income. The other main tax benefits of being a student are the tax credits on tuition fees and the federal tax credit on student loan interest.

 

[cannon_fodder]

The Alternative Minimum Tax would likely kick in. Going to Taxtips.ca and putting in $65k of dividend income for 2010 results in a little more than $2k in taxes.

Of course, you would likely have many expenses as a student you could apply to your income tax return for credits/rebates.