It’s tax time in Canada, the time of year when you look over how much money you made in the previous year and hope that the government has to pay you back.
All the information contained in forms, receipts and deduction guides can be overwhelming.
So Global News has compiled a few tips to make the filing process a little less painful.
What is the deadline for filing my taxes?
April 30 — if you have a balance owing. The regular filing deadline is April 30, but since that falls on a Sunday this year, the CRA will consider your taxes filed on time as long as they are received or postmarked on or before May 1.
June 15 — If you or your spouse or common-law partner ran a business in 2016. But you still have to pay your taxes by April 30 if you owe money to the government.
READ MORE: Self-employed? Here are 6 steps to get your taxes right
What you need to know to file your taxes in…
What is the deadline to contribute to my RRSP?
There is no deadline to contribute to your RRSP. But if you wanted to claim your contribution as a tax deduction against your 2016 income, it’s too late, unfortunately. You had to make your contribution by March 1.
READ MORE: No RRSP? No problem — not everyone needs one.
What are the tax brackets?
Editor’s note: An earlier version of this story reported the 2017 tax brackets. We have updated the story to show the 2016 tax brackets and added an example clarifying how the tax rates apply.
The first $45,282 of taxable income — pay 15 per cent in tax
Next $45,282 of taxable income, up to $90,563 — pay an additional 20.5 per cent in tax
Next $90,563 of taxable income, up to $140,388 — pay an additional 26 per cent in tax
Next $140,388 of taxable income, up to $200,000 — pay an additional 29 per cent in tax
Any taxable income over $200,000 — pay an additional 33 per cent in tax
So, if you made $50,000 in taxable income in 2016, your federal tax would be 15 per cent on the first $45,282 you earned, or $6,792. On the remaining $4,718 of income, the CRA would charge you $967, or 20.5 per cent. Your total federal tax would be $7,759. Remember, though, that your taxable income isn’t generally what you made in the year. It’s the income on which tax can be applied, that is, what you report on line 260 of your federal return.
READ MORE: Airbnb: 3 things you need to know at tax time if you rent out your home
How are taxes calculated?
Editor’s note: The text below has been modified from its original version to clarify that moving expenses are a deduction, not a tax credit.
The amount of tax you pay is determined based on how much money you make. You can make various deductions that reduce the amount of income you have to pay tax on.
First, you declare the total, or gross income you made throughout the year, according to TurboTax, a tax-filing software company.
That should include employment income, as well as any money you made from your own business, investments, interest, capital gains and dividends.
Then, you look for tax credits and deductions to reduce the amount of income you have to pay tax on. They can include the public transit amount, which allows you to claim the cost of your transit passes, the home buyers’ amount, which lets people who purchased homes claim $5,000 in the years that they bought; or even your moving expenses, under certain conditions.
Your federal tax is calculated on whatever income is left after credits and deductions.
What do you need to do before filing your taxes?
You’ll need to gather a number of documents, based on how you made your money. That can include the following:
- A T1 General 2016 form, which allows you to note your income, credits and deductions.
- If you’re an employee, a T4, Statement of Remuneration Paid form, which shows how much your employer paid you.
- If you’re retired, a T4A, Statement of Pension, Retirement, Annuity and Other Income, which shows you much you earned in retirement payments.
- If you made money from investing, you’ll need a T5, Statement of Investment Income, which shows items such as dividends, interest from bonds or money you loaned, and much more.
- If you received Employment Insurance (EI), a T4E, Statement of Employment Insurance and Other Benefits.
- If you received worker’s compensation or social assistance, a T5007, Statement of Benefits.
READ MORE: Does it pay to leave Canada for tax reasons? Experts weigh the pros and cons
What documents do you need for your tax deductions?
Your slips: H&R Block says you’ll need slips like your T4, your T4A, your T4E or your T5007.
Receipts: You’ll need these to claim expenses such as public transit, child care, and moving and medical expenses.
All your receipts for your RRSP contributions: In addition to a Notice of Assessment, you’ll need to have all your RRSP receipts – and there are often more than one. The first receipt will likely cover your contributions from March to December, the other for January and February. Have them both so you can add them up and have proof of how much you contributed in total.
Other documentation: You’ll need to bring a Notice of Assessment to determine how much you can contribute to your RRSPs.
Certificates: You’ll also need certificates that allow you to claim certain deductions, like for volunteer firefighters or search and rescue personnel.
What are some tax credits and deductions you can take advantage of?
Registered Retirement Savings Plan (RRSP): You can reduce your taxable income by contributing to an RRSP. There are, however, limits. The most you can contribute for 2016 is 18 per cent of your income, to a maximum of $25,370, though you may be able to contribute more if you didn’t reach the limit in previous years. Check last year’s notice of assessment for your contribution room.
Child Care Expenses: You can claim child care expenses if you paid someone else to look after your kid while you went to work. That includes caregivers, daycare centres, day camps and boarding schools. You’re allowed to claim up to $8,000 for any kids aged up to seven years old, or $5,000 per child aged seven to 16 years old.
Spouse or Common-Law Partner Amount: You can claim this if your spouse or common law partner made less than $11,474 in 2016. If you’re eligible, you won’t have to pay as much income tax.
Federal Political Contributions: You can claim any donations you made to federal political parties or candidates for seats in the House of Commons. A tax filer can claim a maximum of 75 per cent of the first $400 they donated, 50 per cent of any donation between $400 and $750, and 33.5 per cent of any contribution over $750, according to TurboTax. The highest credit you can obtain is $650.
Donations and Gifts: You’re allowed to claim any donations or gifts you made to particular institutions, so long as they don’t exceed 75 per cent of your income.
Children’s Fitness Tax Credit: Tax filers can claim a maximum of $500 for kid, which helps parents to offset the cost of registration in a program that promotes physical activity.
Children’s Arts Amount: Parents can also claim up to $250 per kid for any registration fees for artistic, cultural or recreation programs.
READ MORE: Canadian taxes: Here’s what will be more expensive in 2017
What are some new tax credits to claim this year?
Teacher and Early Childhood Educator School Supply Tax Credit: Teachers and child educators can claim a 15 per cent tax credit on up to $1,000 worth of purchases of teaching supplies.
What are some little-known tax credits?
Medical Expenses: Tax filers are allowed to claim any medical expenses they paid for in any 12-month period that ended in 2016. But there are some restrictions. You can, for example, claim an ambulance service, an artificial limb or an injection pen. You can even claim an air conditioner, if you have a prescription. You may not claim any gym fees.
Moving Expenses: If you move to a new home for work or to run a business at a different location, then you can claim any moving expenses if you took up residence that’s 40 kilometres closer to your new workplace. That includes transportation, temporary living expenses, even meals you ate while moving. If you’re selling your home, you can also claim items like any realtor commissions, advertising or penalty you pay on your mortgage.