Canadian taxes

Types of Taxes Collected by Government

1. taxes on Purchase (HST - 13% in Ontario)

2. excise taxes

3. property taxes

4. tax on wealth

5. tax on earnings

Taxable Income 

the portion of your income subject to tax

Total income = allowable deductions - taxable income

Tax Credits

subtract directly from the amount of tax you owe 

What are the two types of tax credits?

non refundable

refundable

Non refundable tax credit

could reduce tax to zero

Refundable tax credit

could reduce taxes to zero AND give you money

What are the common tax credits in Canada?

1. Basic personal amount

2. charitable donations

3. medical expenses

4. tuition tax credit

5. GST/HST credit

6. first time homebuyer

RRSP

Registered Retirement Savings Plan 

What are the key benefits of RRSP

Contributions are tax deductible 

Investments grow tax free while in the plan 

Contribution limit: 18% of previous year’s earned income (up to a maximum)

FHSA

first home savings account

What are the key benefits of FHSA

Contributions are tax deductible 

Investments grow tax-free while in the plan 

Contribution limit: lifetime of $40,000: maximum $8,000/year

What can charitable donations lead to?

significant tax credits.
First $200 of donations: 15% federal tax credit 

Donations over $200: 29% federal tax credit 

Additional provincial tax credit apply

Tip: Save donations receipts for multiple years to maximize credits 

Marginal Tax Rate

the rate of tax on your next dollar of income.

What tax system does Canada use?

progressive tax system (tax brackets)
As income increases, it’s taxed at progressively higher rates

Average Tax Rate

Average tax rate = total tax paid/total taxable income
Always lower than your marginal tax rate in a progressive system

Excise Tax

additional tax on specific goods and services

ex. gasoline, cigarettes, alcoholic beverages, tires, air travel etc.