Fortunately, most personal tax programs calculate this automatically.
Thanks for the info, what now?
It can be helpful to know where you fit in the federal and provincial tax brackets, but what if your income has changed or fluctuates from year to year? What if you get a raise?
“Understand what tax bracket you are in and what that means to you,” Zakharia explains, adding that if you make more money a year (through a pay raise or some side activity) you don’t. don’t need to panic. It is true that the more money you make, the more you will be taxed, especially if it pushes you into the next tax bracket. “But not all of your income is taxed in the top bracket, it’s just the amount in that bracket,” says Zakharia. In other words, if you earn $ 100,000, you don’t pay 26% federal tax on the entire $ 100,000, only on the small portion that is over $ 97,069. And the same goes for the provincial tax, too. For residents of Quebec, simply consult the table above if you move to another tax bracket.
If your side activity is your own independent business, of course, taxes will not automatically be deducted from your paycheck. It is your responsibility to put money aside to pay income tax your net earnings (after deduction of business expenses) on a quarterly or annual basis. Make sure you report all of your income, otherwise you may have to pay a 10% penalty on the amount you didn’t report.
For those with investment income, which includes everything from selling a property to cashing out shares, various rates apply. “Different types of income are taxed differently,” Zakharia explains. Dividends, which are distributions of after-tax corporate profits, and capital gains, which are profits from the sale of real estate or investments, are taxed more favorably than other income, such as income from employment, business, retirement, etc.
Income tax brackets words you need to know
Speaking of tax brackets, you might also hear a few of these words. Here is a quick list of definitions for your reference.
Basic amount: On your tax form, this is EPS, also known as the “basic personal amount”. This amount is not taxed and it was created to avoid taxing people with incomes below this amount. The base amount for 2020 is $13 229.
Gross revenue : Your full income, tax-free and without deduction.