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Canadian income taxes: everything you need to know about them
26th Apr 2021
Are you moving to Canada? In this article, we summarized and simplified Canadian income taxes.
Have you worked in Canada already? We will file a tax refund for you.
Just like most first-world countries, Canada has a progressive tax system too. What is different about Canadian taxation is you don’t pay only one income tax, but two – a federal income tax and territorial/provincial income tax. Your paycheck will also be reduced by the CPP – Canadian Pension Plan payment. The CPP rate is currently 3% of your taxable income and after leaving the country you can ask for a partial refund.
When employed, both your income taxes and CPP payment will be paid by your employer. Though in many countries students are freed of paying income taxes, in Canada every employee above the age of 18 has a tax obligation.
Federal income tax
The federal income tax has five possible rates (15%, 20,5%, 26%, 29%, and 33%), which are determined by the amount of taxable income. The final tax amount is calculated ‘’gradually’’.
| Tax rate | Yearly taxable income |
|---|---|
| 15 % | 0 - 53 359 CAD |
| 20,5 % | 53 359,01 CAD - 106 717 CAD |
| 26 % | 106 717,01 CAD - 165 430 CAD |
| 29 % | 165 430,01 CAD - 235 675 CAD |
| 33 % | > 235 675,01 CAD |
For instance: if your yearly income is 100 000 CAD, the tax will be calculated followingly:
- 15 % from 53 359 CAD = 8 004 CAD
- 20,5 % from 53 359 CAD = 10 939 CAD
- 8 004 CAD + 10 939 CAD = 18 943 CAD – federal income tax
Provincial (territorial) tax
Apart from taxes paid to the federation, you also have to pay an income tax to the province/territory you live in. The rate differs based on your location. The calculation is the same as with federal taxes.
| Tax rate | Yearly taxable income |
|---|---|
| 5,05 % | 0 - 49 231 CAD |
| 9,15 % | 49 231,01 CAD - 98 463 CAD |
| 11,16 % | 98 463,01 CAD - 150 000 CAD |
| 12,16 % | 150 000,01 CAD - 220 000 CAD |
| 13,16 % | > 220 000,01 CAD |
For instance: If your yearly income in Ontario is 100 000 CAD, the tax will be calculated followingly:
- 5,05 % from 49 231 CAD = 2 486 CAD
- 9,15 % from 49 231 CAD = 4 505 CAD
- 11,16 % from 1 538 CAD = 172 CAD
- 2 486 CAD + 4 505 CAD + 172 CAD = 7 163 CAD – provincial income tax
What documents do I need to fill in a tax return?
To complete your tax return you will need these documents:
- Canadian social security number
- T-slips or RL-slips (in employed)
- records of other income (e.g. income statement when self-employed)
- Receipts for tax deductions (medical expenses, charitable donations, childcare or caregiver expenses, monthly transit passes, etc)
- Data from past tax years (Registered Retirement Savings Plan (RRSP) contribution limit, repayments required under the Home Buyers Plan or Lifelong Learning Plan)
When to file a tax return?
People who aren't self-employed must file a tax return by the 30th of April every year. Self-employed individuals don't have to submit their tax refund until the 15th of June.
However, it is recommended that you always complete it by the end of April. If you end up owing any tax the tax office will add interest to the owed amount as of the 30th of April.