This is a free Canadian online income tax calculator designed to quickly estimate how much tax will be owing. 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. It is interest to compare what one’s tax rate would be in various provinces and territories. This information is believed to be accurate but cannot be relied upon without the help of an expert such as an accountant.
Definitions and how to Use the Table
Taxable Income. Enter the amount of income that tax will be paid on. This is income after any tax deductions you will be making. For 2017, every taxpayer can earn taxable income of $11,635 ($11,474 in 2016) before paying any federal tax. Deduct this amount from your income before entering it into the calculator.
RRSP Contribution. This is your annual allowable RRSP contribution which is calculated at 18% of your total income. However you may have carryforward from other years.
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