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Personal Income taxes

Taxes imposed on income earned.



For any year that you earn income, you must file a tax return that consists of a completed T1 General Income Tax and Benefit Return (T1 General), plus supporting documents. Your tax return will show whether a sufficient amount of taxes was already withheld from your paycheques, whether you still owe taxes, or whether the government owes you a refund. If you still owe taxes, you should include a cheque for the taxes owed along with your completed T1 General.


Taxes Paid on Consumer Purchases

Many taxes, such as the goods and services tax (GST), are paid at the time of a transaction


PST (provincial sales tax)

is imposed at the provincial level in most provinces.


HST (harmonized sales tax)

Some provinces have combined their PST with the GST


excise tax

Special taxes levied on certain consumer products such as cigarettes, alcohol, and gasoline.


capital asset

Any asset that is acquired and held for the purpose of generating income.


Taxes Paid on Property

Homeowners pay property tax on the value of their homes and land. This form of taxation is the major source of revenue for municipal governments. Property taxes are determined based on the assessed value of your property. In order to allocate taxes fairly, a municipality will multiply your assessed property value by a tax rate, also known as a mill rate.


Mill rate

The mill rate reflects the amount of taxes that should be paid on property for every $1000 of assessed property value.


Do You Have To File a Return?

■ You have to pay tax for a calendar year
■ The CRA sent you a request to file a return
■ You and your spouse or common-law partner elected to split pension income for the calendar year
■ You received Working Income Tax Benefit (WITB) advance payments in the calendar year
■ You disposed of property in a calendar year or you realized a taxable capital gain
■ You have to repay any of your OAS or EI benefits
■ You have not repaid all of the amounts you withdrew from your registered retirement savings plan (RRSP), Home Buyers’ Plan (HBP), or Lifelong Learning Plan (LLP)
■ You have to contribute to the Canada Pension Plan (CPP)



is a refundable tax credit intended to provide tax relief for eligible working low-income individuals


Employment Insurance (EI)

Government benefits that are payable for periods of time when you are away from work due to specific situations.


Why Students Should File Tax Returns

1. , you may be eligible for a refundable GST/HST credit. The GST/HST credit is a quarterly tax-free payment made to low- and modest-income earners.
2. as a student, you likely have eligible tuition, education, and textbook tax credits that you can use to reduce your tax payable. If you do not have any tax payable, these tax credits can be transferred to another taxpayer (a parent or grandparent) or they can be carried forward so that you can claim them in years when you do have tax payable.
3. consider that your RRSP contribution room is based on every dollar of income you earn minus pension plan adjustments. By filing a return and declaring income, you will have more room to contribute to your RRSP in the future. Your RRSP is your personal pension plan and it is in your best interest to maximize your future contributions to it.


Filing Your Return

The tax year for federal income taxes ends on December 31. Individual income tax returns must be filed and taxes must be paid by April 30 of the following year. Self-employed individuals have until June 15 to file their income tax returns, although any taxes owing must be paid by April 30. If a taxpayer does not file his or her tax return on time, interest charges and a penalty will be assessed based on any amounts owing.


T4 slip

A document provided to you by your employer that displays your salary and all deductions associated with your employment with that specific employer for the previous year.


steps to completing a T1 General Income Tax and Benefit Return

step 1: Calculate Total Income
step 2: subtract deductions
step 3: calculate taxable income
step 4: Calculate Net federal tax payable
step 5: calculate net provincial tax payable
step 6: calculate total tax payable
step 7: determine total tax already paid
step 8: Refund, or balancing owing


total income

All reportable income from any source, including salary, wages, commissions, business income, government benefits, pension income, interest income, dividend income, and taxable capital gains received during the tax year. Income received from sources outside Canada is also subject to Canadian income tax.


interest income

Interest earned from investments in various types of savings accounts at financial institutions; from investments in debt securities such as term deposits, GICs, and CSBs; and from loans to other individuals, companies, and governments.


T5 slip

A document provided to you when you receive income other than salary income.


dividend income

Income received from corporations in the form of dividends paid on stock or on mutual funds that hold stock. Dividend income represents the profit due to part owners of the company.


capital gain
capital gain

Money earned when you sell an asset at a higher price than you paid for it.


capital loss

Occurs when you sell an asset for a lower price than you paid for it.



An item that can be deducted from total income to determine taxable income.
common deductions are contributions to RPP (registered pension plan) RRSP (registered retirement savings plan),,, union dues, child care expenses, support payments


net income

The amount remaining after subtracting deductions from your total income


Taxable income

Taxable income is equal to your net income minus some additional deductions.
- helps the government decide what tax bracket you will be in


marginal tax rate

The percentage of tax you pay on your next dollar of taxable income.


average tax rate

The amount of tax you pay as a percentage of your total taxable income.


tax planning

Involves activities and transactions that reduce or eliminate tax.


tax avoidance

Occurs when taxpayers legally applying tax law to reduce or eliminate taxes payable in ways that the CRA considers potentially abusive of the spirit of the Income Tax Act.


tax evasion

Occurs when taxpayers attempt to deceive the CRA by knowingly reporting less tax payable than what the law obligates them to pay.