Most Canadians must pay taxes, but far fewer are completely clear on the nuts and bolts of how the process works, what exactly gets taxed, and which credits and deductions might be available to them. Because the idea of studying Canadian tax law is far from appealing, we’ve assembled easy-to-understand answers to some of Canada’s most common tax questions here, so you can feel confident and get on with your day.
1. What is a tax deduction?
The Canada Revenue Agency (CRA) has a variety of deductions that Canadians can use to reduce their taxable income and, therefore, their tax bill. Since your taxable income determines your federal and provincial tax rate, lowering that figure often means paying less in taxes overall.
There are two main sets of deductions used to calculate your taxable income. The first set deducts from your total income to get your net income. Common deductions from this set include moving expenses, professional dues, support payments and eligible child-care expenses.
Once you arrive at your net income, you can make a second set of deductions. They include things like northern residents deductions and a Canadian Forces personnel deduction. Once you subtract any applicable deductions from your net income, you’ll have your taxable income.
2. What is a notice of assessment?
After submitting your tax return, the CRA will send you a notice of assessment (NOA) to notify you that your tax return was received. An NOA contains a variety of important information, including a summary of your tax return, the amount of money you owe or are getting back as a refund, any changes that the CRA made to your return, and your RRSP deduction and contribution limits. It’s vital to review the document because it confirms the status of your tax return and allows you to check for any potential errors or issues that need to be addressed.
3. What is the tax filing date for 2021?
In Canada, the filing deadline for employed individuals is April 30, 2022, and for self-employed individuals, it’s June 15, 2022. The payment deadline for those who owe taxes is April 30, 2022, for employed and self-employed individuals.
4. Where do I mail a tax return in Canada?
Although most Canadians now file their taxes online, you can still mail in a paper return. Where you send that paper tax return depends on your location.
Those living in Alberta, British Columbia, Manitoba, Saskatchewan, Northwest Territories, Yukon and some cities in Ontario (Hamilton, Kitchener, Waterloo, London, Thunder Bay, or Windsor) should mail tax returns to:
Winnipeg Tax Centre
Post Office Box 14001,
Winnipeg MB R3C 3M3
If you live in New Brunswick, Newfoundland and Labrador, Nova Scotia, Nunavut, Prince Edward Island or Ontario (Barrie, Belleville, Kingston, Ottawa, Peterborough, St. Catharines, Sudbury, or Toronto), as well as Quebec (Montréal, Outaouais, or Sherbrooke) mail tax returns to:
Sudbury Tax Centre
1050 Notre Dame Avenue
Sudbury ON P3A 5C2
All other residents of Quebec can mail their tax return to:
Jonquière Tax Centre
2251 René-Lévesque Boulevard
Jonquière QC G7S 5J2
If you are not presently living in Canada, check the CRA website for where to mail your tax return.
5. What is inheritance tax?
In some countries, a person who inherits money or property from a deceased person’s estate must pay an inheritance tax. In Canada, there is no inheritance tax. Instead, it’s a deceased person’s estate that must pay any taxes owing (such as the deceased’s income tax in the year they died) rather than any beneficiaries.
An executor must file a tax return on behalf of a deceased person. Taxes will then be assessed and any taxes owed will be paid with funds taken out of the estate before assets are distributed to beneficiaries according to the will.
6. What is capital gains tax?
When you sell an investment or a real estate property for more than you paid, that profit is called a capital gain (also known as a realized capital gain). In Canada, 50% of the value of a capital gain is subject to tax.
For example, if you paid $100 for a stock share and sold it for $200, the capital gain would be $100. You would have to pay taxes on 50% of the $100, so you would have to pay taxes on $50.
Note that investments held in registered accounts, such as an RRSP or TFSA, and a homeowner’s primary residence are exempt from the capital gains tax.
7. Are moving expenses tax deductible?
Moving expenses are only tax-deductible under very specific circumstances. You can only claim them if your move was related to your job or business. In some cases, a student who moved to pursue post-secondary education may also deduct moving expenses from any scholarships or bursaries (which would be reported as income) they received.
8. Are cash gifts taxable?
In most cases, there is no gift tax in Canada unless the gift of cash is between an employer and employee, in which case it’s considered a taxable benefit.
9. What is the BPA tax credit?
The basic personal amount (BPA) is a non-refundable tax credit all Canadians can claim on their income tax return to reduce their taxable income. You don’t pay any federal tax if your taxable income is equal to, or falls below, the BPA. The amount changes yearly to keep pace with inflation. For the 2021 tax year, the BPA is $13,808. It will increase to $14,398 for the 2022 tax year. Each province and territory also has its own BPA.
10. Is there a tax deduction for working from home?
Whether you began working from home due to the COVID-19 pandemic or were already a remote worker, you’re likely eligible for a tax deduction. There are two ways to earn this work-from-home tax benefit.
You can use the simplified temporary flat-rate work-from-home expense deduction. This new method was introduced in the 2020 tax year due to the COVID-19 pandemic. The extended program allows fully employed Canadians to claim up to $500 in the 2021 and 2022 tax years.
You can opt for the detailed method, which has been available to Canadians since before the pandemic. To be eligible for this method, you have to be self-employed and work from home, or have an employer that requires you to perform a significant portion of your work from home (and who provides you with a signed form T2200 to show you aren’t being reimbursed for those expenses).
A previous version of this article misstated how a $100 capital gain would be taxed.
How Does a Tax Refund Work in Canada?
A tax refund is issued by the Canada Revenue Agency if you overpay your taxes throughout the course of a year.
Tax Credits in Canada: What They Are and How to Use Them
Tax credits help Canadians pay less income tax. Tax credits exist for parents, students, people with disabilities, retirees and more.
What are Canada’s Tax Brackets?
Canadian tax brackets determine the annual tax rate you’ll pay. Tax brackets may vary by your income and location.
Provincial Income Tax Rates in Canada
Canadians pay provincial income taxes in addition to federal taxes. Provincial income tax rates vary depending on where you live at the end of the tax year.