Level 1 Course – Chapter
2022-2023
1
Topic of the Day
Calculate federal tax payable
Calculate Ontario non-refundable credits
Calculate Ontario tax payable
Calculate Ontario tax reduction
2
Total Income (Line 15000)
Total Income refers to the income accumulated from different sources during the taxation year.
This figure represents gross income earned in a year.
This figure is found on Line 15000 of T1 General.
A breakdown of the income is found on lines 10100 to 14700
3
Example:
Ken has income from two different employers. T4 slip received from Toronto
district school board shows: Box 14 =$15,000, Box 44= $750. His T4 from TD
bank shows: Box 14 = $20,000. He received a T5 from Scotia bank which
shows: Box 13 =$5,000. He also received a T4E slips from Service Canada
when he was off work: Box 14 = $7,000.
a) What is his total income on line 15000?
b) What is his net income on line 23600?
c) What is his taxable income on line 26000?
4
4
Example (cont’d)
Answer:
Line 10100: $15,000 + $20,000 = $35,000.
Line 11900: $7,000
Line 12100: $5,000
Line 21200: $750
a) Total income on line 1500 is $47,000
b) Net income on line 23600 is $46,250 ($47,000 - $750)
c) His taxable income on line 26000 = $46,250
5
5
Net Income (Line 23600)
Net Income is defined as your income after subtracting allowable deductions from the
total income.
Net Income = Total income – allowable deductions or losses
Net income is used to calculate various tax credits such as: GST credit, Canada child
benefit, spousal credit, provincial tax credits, medical expenses threshold and age
credit.
Web Example
Donald is a single . His date of birth is 1981.01.01. His sin is 100-000-007. Use your
own address. Donald received a T4 slip from Bell Canada which shows: Box 14 =
$55,000 and Box 20 = $7,500.
Note: Please
note deductions
are discussed in 6
next chapter 6
Web Example
What is his total income?
His Total Income :$55,000 7
What is his Net income?
His Net Income :$47,500 8
Taxable Income (Line 26000)
Taxable income can be defined as earnings before provincial and federal tax is
deducted. Taxable income is used to calculate tax payable. To arrive at this figure,
the following items need to be subtracted from the net income.
Other payment deduction
Worker’s compensation
Social assistance and
Net federal supplement
Non-capital losses of other years
Net capital losses of other years
Capital gains deduction
Note: Please note
deductions are discussed
in next chapter
9
9
Refund or Balance Owing ( Line 48400 or
Line 48500)
In order to calculate an individual’s refund or balance owing, two important
topics need to be discussed. They are as follows:
Net federal tax
Provincial tax
10
10
Net Federal Tax ( Line 4200):
Federal tax is based on taxable income. Schedule 1 is used to determine federal income
tax.
Schedule 1 (on the following slide) is used to determine federal income tax
The steps to calculate federal tax are as follows:
Net federal tax = Taxable income – federal non- refundable tax credits
Take the amount of taxable income from Line 26000 of the return and enter it on Line
36 of schedule 1.
Depending on the range of your taxable income, complete only one of the 4 columns.
11
11
Calculation of federal tax
12
12
Example
Jack is 50 years old and single. Jack received T5 slip from RBC showing Box 13 = $
15,500. Would he be paying any federal income tax on his income?
Answer: Let’s use schedule 1 to calculate federal tax.
13
13
Provincial tax
The Canada Revenue Agency (CRA) collects and administers the individual
income taxes for the governments, except for the province of Quebec. In
addition to paying federal income taxes, you also are responsible for paying
provincial income taxes. "Tax rates vary from province to province.
Residents of Ontario can use Form ONT428 to determine Ontario tax and
Ontario tax reduction.
14
14
15
15
Example
Jack works at a Home Depot. He received a T4 slip showing:
Box 14 = $45,500.00
Box 16 = $2,205.00
Box 18 = $718.90
His disability tax credit is approved by the CRA.
a) Which credits can he claim on Schedule 1?
b) Which credits can he claim on his ON428?
16
16
Answer:
Credits Schedule 1 ON428
Basic Personal amount $14,396.00 $11,141.00
CPP Credit $2,394.00 $2,394.00
EI Credit $718.90 $718.90
Canada employment credit $1,287.00 N/A
Disability credit $8,870.00 $8,790.00
Total non-refundable credit $27,665.90 $23,043.90
Tax rate Federal & Provincial 15.00% 5.05%
17
17
Ontario Surtax :
In simple words, the Ontario’s Surtax is a second layer of taxes (on top of
the basic provincial Income tax) that residents of the province of Ontario
are obligated to pay to the tax man. The calculation of the Ontario’s Surtax
is a two-step process:
First, you calculate the basic provincial tax on your personal income.
Second, you take the basic provincial tax calculated in the first step and
to calculate the Ontario’s Surtax using the rate.
Calculations are shown later in this chapter. What’s important here to
understand is that the surtax is calculated not on your income, but on your
Basic Provincial Tax.
If basic Ontario tax is more than $4,991 then a taxpayer must pay an
18
additional surtax of 20% plus 36% if Ontario tax is more than $6,387 18
Ontario Surtax
Web-Example
Jonna is born on January 1, 1995 and her sin is 100-000-041. She is single.
Use your own address. She received a T5 slip issued by Scotia bank: Box
13 = $141,000. Does she to have pay Ontario surtax?
Answer: Yes, let's look at this example on Web.
Ontario tax reduction
The Ontario Tax Reduction lowers or eliminates the income tax you may pay
in Ontario. You must be a Canadian resident on January 1 and an Ontario resident on
December 31 of that same tax year to qualify.
The basic Ontario tax reduction is $251;
Additional tax reduction of $464 for each dependent child; and
For disabled or infirm child, a taxpayer can claim an additional $464 for a total of
$928.
If you had a spouse or common-law partner on December 31, only the person
with the higher net income can claim the Ontario Tax Reduction.
21
21
Ontario Tax Reduction
22
Web - Example
Don has a T5 Box 13 is $24,500. His
SIN is 870-001-500. His date of birth
is June 1, 1951.
How much can he save on his tax
return by claim ontario tax
reduction?
Answer: Ontario tax reduction is
$62.62
23
23
Low-income Individuals and Families (LIFT) Tax
Credit
LIFT tax credit was introduced effective January 1, 2019. You can claim it each year
when you file your tax return on line 62140 of ON428.
LIFT tax credit provides up to $875 each year in Ontario personal income tax relief to
low-income workers, including those earning minimum wage.
It is a non-refundable tax credit that you can use to reduce or eliminate your Ontario
personal income tax, excluding the Ontario Health Premium.
24
24
Low-income Individuals and Families (LIFT) Tax
Credit
Who is eligible
Low-income tax filers, including those earning minimum wage, can claim the Low-Income Workers
Tax Credit.
To qualify:
you must be a Canadian resident at the start of the tax year
you must be an Ontario resident on December 31
you must have employment income on line 10100 or 10400
you must owe Ontario personal income tax
your individual adjusted net income for the year must be below $50,000
your adjusted family net income for the year must be below $82,000
you must not have spent more than six months in prison during the year
25
25
Ontario health premium
The health premium is paid by
Ontario residents through the
personal income tax system.
Money collected through the tax
helps fund Ontario's health
services. The health premium
ranges from $0 if your
taxable income is $20,000 or
less, to $900 if your
taxable income is more than
$200,600
27
27
Ontario health premium (cont’d)
28
28
Web - Example
Joanna is single is 44 years old. Her SIN is 343-434-346 & has T5
interest income of $41,000. Jonna lives in Ontario. How
much Ontario health premium she would have to pay?
Answer: Let's look this example the on Web.
29
29
Ontario health premium (cont’d)
30
30
End
Do the online exercises for chapter 5
Start reading chapter 6
31
31
