“Putting it all together”

Look at references to find out which chapter.

Calculation of Tax for Individuals
Income tax is imposed by the federal and
provincial governments:
 Federal tax - % of taxable income

 Provincial tax - % of taxable income

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Determination of Tax for an Individual
Federal tax:
Primary federal tax XX
Non refundable tax credits (see 10-3) (XX)
Federal Dividend tax credit (XX)
Basic federal tax XX

Provincial tax:
Primary provincial tax XX
Provincial surtax XX
Specific provincial tax credits (XX) XX

Combined federal and provincial tax XX

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Primary Federal Tax
 Progressively higher tax rates to higher levels of annual
income.
 Each rate of tax is applied separately to the portion of
the individual’s income that falls within the applicable
range.

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Primary Federal Tax (p. 141)
Taxable Income Range (2019) Rate

Up to $47,630 15.0%

$ 47,631 to $95,259 20.5%

$ 95,259 to $147,667 26.0%

$ 147,668 to 210,371 29.0%

Over $210,371 33.0%

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Personal Tax credits
 Represents dollar for dollar reduction in taxes payable
 (Like a coupon at the cash register – products are
totalled, this reduces the amount you actually pay)
 Represents same tax savings to individuals – no matter
what tax bracket that they are in

 Often represented as A X B
 A = percentage for year = low tax rate ( 15%) (with
exceptions)
 B = Tax credit base amount (amount eligible for TC)

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Personal tax credits
Basic – Every resident in Canada – entitled to credit on
first $12,069 earned --- calculate tax on it and then take
it off
 15% x $12,069= $1,810
Spousal Tax credit– if you have dependent spouse
 15% x $12,069 = $1,810
 Reduced by 15% of the spouse’s net income.
 Can use formula 15% x ( 12,069- spouse’s net income)
 Add $2,230 to base amount if spouse is infirm
Personal tax credit – Eligible dependent
 Extension of spousal tax credit
 Taxpayer must support a “related” wholly dependent
person who lives with them in a self contained
domestic establishment
 Individual taxpayer must be
 Unmarried
 Not common law
 Claim another basic personal amount ( 12,069 x 15%)
 Subtract income of dependent if any
 Add $2,230 to base amount if infirm
Personal Federal Tax Credits
Canada Caregiver tax credit (p. 149)
 Provide in-home care for::
 dependent relative who is infirm over age of 17

$7,140 x 15% = $1,071 tax credit against federal tax.

 Reduced by 15% of the dependent’s income in excess of
$16,766.
 Eliminated if dependant’s income > 23,545( $16,405 + 7,140)

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Personal Federal Tax Credits
- Age amount - 65 years of age or older
 15% x $7,494 = $1,124
 $7,494 reduced by 15% of net income > $37,790
 Totally clawed back at $ 87,750
 (7,494/0.15) +37,790 = 87,750
 Disability - a severe & prolonged mental or physical
impairment
 15% x 8,416 = $1,262
 Can be transferred to a supporting person if
individual cannot use

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Personal Federal Tax Credits
 Canada Employment Tax Credit
 Employed individuals
 Designed to cover expenses incurred by employees
 Compensate for fact that employees do not get
deduction
 15% of the lesser of:
 $1,222 or
 Net employment income
 (i.e. emp income under $1,222)

 Usually results in 15% x $1,222 = $183

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 Personal Federal Tax Credits
ITA 118(3) – Pension
15% on first $2,000
 “qualified pension income”received in a year.
 If under age 65, Pension plan and amounts related to
death of spouse.
 If over 65,
 Income from RRIF, Pension Plan, DPSP or registered
annuity.
 Spouses who split pension income can double up on this
credit

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Personal Federal Tax Credits
CPP and EI
15% x CPP and EI contributions made by employee–
usually submitted at source
 For 2019, the max CPP and EI contributions are
2,749 and $860 respectively
 Amounts are included on T4 slip of employee
Personal Tax credits
 First time Home Buyer’s Tax credit
 15% x first $5,000 of cost of eligible home
 T/p or spouse cannot have owned a house:
 in year of purchase
 OR
 prior 4 calendar years
Personal Tax credits
 Home Accessibility Tax credit
 Tax credit for seniors or disabled taxpayerto
update/renovate home to promote independent living.
 65 years of age or older (or receiving Disability Tax
credit)
 Up to $10,000 per dwelling , $10,000 in total (if you own
more than one property)
 15% x
 Lesser of:
 $10,000

 Amount of qualifying renovations

Digital News Subscriptions
 Temporary tax credit for digital subscriptions with a
qualifying Canadian Journalism Organization

 15% of:
 Actual amount paid
 $500
Personal Federal Tax Credits
(based upon actual amount spent up to limit)
Adoption Expenses
 15% of actual qualifying expenses to maximum of $16,255

 Eligible adoption expenses is quite extensive list

 See page 153

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Personal Federal Tax Credits
ITA 118.1(3) - Charitable donations
 15% x first $200 of annual contributions and
 29% x the remainder.
 Annual donations cannot exceed 75% net income
 Unused Donations can be carried forward for 5 years

 Can donate gifts of capital property (i.e. Shares)

 Watch the 75% net income restriction above, but,
lifted for donations of ecological or cultural property
that are donated directly (donations in kind)

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Personal Federal Tax Credits
- Medical expenses –
 15% x qualified medical expenses exceeding:
 either 3% of the taxpayer’s net income, or
 $2,352, whichever is less.

 Can include expenses of individual and expenses incurred by

taxpayer on behalf of any dependant (
 Broad meaning of types of expenses that qualify – very
detailed description
 Can choose any 12 month period as long as it ends in the
taxation year ( i.e. Do not need to claim for Jan 1 – Dec 31)

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Tax planning – medical expense
 Look at threshold --- can only start claiming NRF tax
credit for amounts above the lesser of:
 A) 3 % of net income
 B) $2,352
 If husband has net income of $100,000 ( 3% = 3,000)
 If wife has net income of $30,000 (3% = 900)
 Want wife to claim it because every dollar over $900
will count for credit.
 Maximize dollar amount by picking best 12 months
Personal Federal Tax Credits
Education Related (Tuition fees)
attend a university, college, or other certified post-
secondary institution
 15% x tuition fees paid.

 Note that education and textbook amount was

repealed for 2017 (federal)

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Personal Federal Tax Credits - Tuition
and Education credits

 - The student may not have sufficient income to utilize

the above credits.
 The unused portion is transferable - up $750 (15% x $5,000)
annually to a spouse, parent, or grandparent.
 Less any credits used by student.

 Alternatively, the student may keep the unused credit and

carry it forward indefinitely.

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Personal Tax Credits –
Second Category
Political contributions  ITA 126 - Foreign tax credit
 Based on a graduated
 Investment tax credits
scale.
 Annual credit is:  Logging tax credit
 75% of the first $400,  Labour-sponsored fund
 50% of the next $350, credit
and
 33 1/3% of contributions
over $750.
 Max. of $1,100 annually

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Provincial Taxes
 Determine their primary tax by applying specified tax
rates to the federal taxable income.
 Rates vary from province to province.
 Specify their own tax credits.
 Individuals are subject to tax based on the province
they live in on December 31 of the taxation year.

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Final Step
 Subtract your NRF tax credit total from the taxes
payable
 Get the final taxes payable number 23,500
 Subtract:
 Taxes already remitted to government (20, 000)
 Taxes withheld at source

 T4 – employer

 Interest income

 RRIF, RRSP income

 Installment

 Balance owing (refundable )upon filing: 3,500

Final Step
 Look at the importance of the tax withheld at source

 Is it good to get large refund in May of year following

taxation year?

 What tax planning can we use --- looking at these

calculations?
 Always do tax planning with calculation in mind to
understand opportunities for your client