This is a simple Canadian income tax calculator designed to quickly estimate how much tax will be owing, and what one’s RRSP contribution will likely be. It is based on the information provided by the Canada Revenue Agency at www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.htm and takes into account both federal and provincial income taxes for the different provinces and territories, and the various tax rates of income tax at different income levels.
Taxable Income. Enter the amount of income that tax will be paid on. This is income after any tax deductions including deductions for rrsps and business deductions. Remember to also deduct your personal tax exemption which is $10,822 for 2013 to come up with your Taxable Income.
RRSP Contribution. This is your annual allowable RRSP contribution which is calculated at 18% of your total income. Do not make the 10,822 personal tax exemption deduction before doing this calculation. The maximum RRSP contribution for 2013 is $23,800.
Tax Payable. Total amount of income tax owing.
After Tax Income. This is Taxable Income minus Tax Payable.
Average Tax Rate. This is Tax Payable as a percentage of Taxable Income
Marginal Tax Rate. This is the most important rate when doing various financial planning activities. The marginal tax rate is the rate of tax you pay on the last dollar earned, or the next dollar earned. As an example in Alberta if your taxable income is $100,000 you have an average tax rate of 29% but a marginal tax rate of 36%. If you buy furniture for $1,000 you have to actually earn $1,562.50, pay tax at the top marginal rate of 36%, or $562.50, and have $1,000 left for the furniture. So the true cost of the furniture is $1,562.50
The rates quotes are believed to be accurate and will give an estimate of how much income tax may be payable. However they do not take into account multiple deductions and exemptions that are available and cannot be relied upon without visiting an accountant to calculate your final return.
by Myles Rempel