TaxCalc.ca is a tax calculator in Canada, it is very basic calculator which gives you an idea of how much tax you’ll be liable for come tax time. The calculator can be used for further planning, such as how much to contribute to your RRSP in order to lower your marginal tax bracket, or how much to withdrawal from your RRSP before you enter the next marginal tax bracket.
First you enter the Canadian province or territory you are a resident of on December 31st of the tax year. Canadian provinces have different tax rates, therefore calculation results are different for each province.
Next you need to enter your annual income which includes items such as employment income, pension income, commission income, interest income, etc. These sources of income do not have any special tax treatment so they can all be added together and entered in this area.
Eligible and Non-Eligible Dividend Income
Now enter your eligible and non-eligible dividend income. Dividends are treated differently for tax purposes. The amount you receive is grossed up, so you actually pay taxes on more money than you receive, but you also receive a dividend tax credit which lowers the amount of taxes payable. The gross up and dividend tax credit rates are different for eligible and non-eligible so make sure you separate there.
You also have to enter any capital gain income. Capital gains have a 50% inclusion rate which means you only pay taxes on 50% of the gain. Your gain is calculated as proceeds of disposition, or money you received when you sold the asset, less the adjusted cost base, or whatever you paid for the asset when you first purchased it.
All of the above are considered to be sources of income for calculating taxes. As contributions to an RRSP are tax deferred, they are deducted off your income for the tax year, so any money you put into an RRSP has to be entered to assure it does not get taxed in the year.
RRSP limits are set each year by the minister of finance during the federal budget announcement. For 2017 the total amount you can put into an RRSP is 18% of your earned income or, $26,010.
Since an RRSP contribution is tax deferred to the time the money is withdrawn from the RRSP you can adjust for tax savings. Let’s say you made $300,000 this year in Nova Scotia and will be taxed at 54% but next year you’re taking the year off to go travelling and your marginal tax rate drops to the lowest tax bracket, of 23.79%, you just made a 30% return in one year
Finally you have to enter any taxes already paid during the year. This includes taxes paid as installments, or that were withheld and remitted on your behalf by your employer.
How it works
The Canadian tax system is based on federal taxes and provincial taxes at graduated rates. Our Canadian tax calculator takes your taxable income, and multiplies it by the proper tax rates federally and provincially to arrive at the amount of taxes you will be required to pay when you file your tax return at the end of the year. While it is good to know how TaxCalc.ca calculator works, you just can start using it straight away to calculate your canada tax.