Income Tax
Canadian
BC and Federal Tax Rates
| BC Taxable Income | Tax Rate | Federal Taxable Income | Tax Rate |
|---|---|---|---|
| first $38,898 |
5.06% | first $45,916 |
15.0% |
| over $38,898 up to $77,797 |
7.70% |
over $45,916 up to $91,831 |
20.5% |
| over $77,797 up to $89,320 |
10.50% |
over $91,831 up to $142,353 |
26.0% |
| over $89,320 up to $108,460 |
12.29% |
over $142,353 up to $202,800 |
29.0% |
| over $108,460 |
14.70% |
over $202,800 |
33.0% |
The CPP is part of the Canadian retirement income system. Anyone that is 18 or older must contribute to their CPP. You will start collecting your CPP once you reach 65 years old.
The employee contributes to their CPP.
4.9%
The Canadian Pension Plan is a monthly benefit designed to replace of your earnings during retirement.
25%
Employment Insurance provides employees with regular benefits when they lose their jobs through lay-offs or other non-worker faulted causes.
An employee contributes to their Employment Insurance.
1.63%
Employment Insurance
- Contributing more to your RRSP as a pre-tax contribution will lower your total taxable income.
- Charitable contributions is a way to reduce the tax bill.
- Fees paid for child care expenses are deductible by the lower income spouse.
- Contributing to a TFSA account is another way to reduce taxes. A TFSA is an account in which any investment income earned is not subject to income tax.
- By deducting fees paid to your accountant for preparing your income tax return, you can minimize your taxes for that amount.
Ways to Reduce Income Tax Payable
- A home office deduction means to declare the costs of any workspace that you use regularly and exclusively for your business as a home office expense.
- If you pay for your own health insurance premiums, you can deduct all of your health, dental, and insurance premiums.
- You may deduct 50% of business meals if you keep the records of the meal.
- All business travel, including flight, accomodation, and meals, are tax deductible expenses. 100% of these travel expenses are deductible, except for meals, which are limited to 50%.
- Car expenses for business are also tax deductible. However, you should always keep excelletn records of the date, mileage, and purpose of each trip.
How Self Employed People Have Tax Reductions
| Total Income | Federal Tax | BC Tax | EI & CPP | Annum Total |
|---|---|---|---|---|
| $40,000 | $4279 | $1563 | $2632 | $8474 |
| $60,000 | $8088 | $3103 | $3948 | $15139 |
| $80,000 | $12,188 | $4744 | $5264 | $22196 |
Income Tax Examples
Over a quarter of our federal tax is spent on benefit programs, such as the OAS, GIS, CPP etc. The government then uses approximately 10% for interest payments and 13% for grants, contributions, and subsidies. The remaining is used in the defence budget and public works projects.
How Tax Is Spent
- Another 20% of federal tax is transferred to provincial governments to fund health care programs and help less prosperous provinces and territories.
- Provincial tax is used in areas such as education, healthcare, some natural resources, and road regulations.
- It is also used to regulate and manage provincial services, such as transportation and parks services.
How Provincial Tax Is Spent
- (n.d.). Retrieved January 18, 2017, from http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2014/03/11/17-legal-secrets-to-reducing-your-taxes
- Canada, E. A. (2016, July 20). EI Regular Benefits - How much you could receive. Retrieved January 18, 2017, from https://www.canada.ca/en/services/benefits/ei/ei-regular-benefit/benefit-amount.html
- H. (2014, January 29). How Your Tax Dollars Are Spent. Retrieved January 18, 2017, from http://www.cnbc.com/2008/09/29/How-Your-Tax-Dollars-Are-Spent.html
- Payroll Legislation. (n.d.). Retrieved January 18, 2017, from http://www.payworks.ca/payroll-legislation/CPPEI.asp
- Policy Basics: Where Do Our Federal Tax Dollars Go? (n.d.). Retrieved January 18, 2017, from http://www.cbpp.org/research/federal-budget/policy-basics-where-do-our-federal-tax-dollars-go
- Tax icon #15127 - Free Icons and PNG Backgrounds. (n.d.). Retrieved January 18, 2017, from http://www.freeiconspng.com/free-images/tax-icon-15127
Tax Services — Batavia Tax Services. (n.d.). Retrieved January 18, 2017, from http://olsentax.com/tax-services/
- Team, M. (2016, December 22). How Can I Reduce My Taxes in Canada? Retrieved January 18, 2017, from http://madanca.com/blog/how-can-i-reduce-my-taxes-in-canada/
- TurboTax Canada. (n.d.). Retrieved January 18, 2017, from https://turbotax.intuit.ca/tax-resources/tax-investment/reduce-capital-gains-tax-in-canada.jsp
Citations
deck
By Chris Wong
