This can be done through various deductions and credits. As I’m sure you know, there are ways to reduce your taxes while working. If you’re consistently in this situation, you might want to reduce the tax withheld by your employer and invest that money instead. Getting a tax refund simply means that you loaned the government money throughout the year, and are now getting it back, interest free. Now, I know that people love to celebrate a tax refund, HOWEVER, tax refunds aren’t really a good thing.
If you paid too much tax throughout the year, you get a tax refund. If you didn’t pay enough tax throughout the year, you’ll owe the government come tax time. When you complete your tax return in April, you are simply calculating whether or not enough tax was already paid. Provincial tax works in a similar manner.įor the majority of employed people, income tax is automatically deducted from your paycheque by your employer. You’re always better off earning more income, but only marginally. So even though you were bumped into a higher tax bracket, you still earned more total income, you just didn’t keep as high a proportion of your income in your own pocket at the end of the day. This gives total tax of $17,228.62, or an average of 18.1% tax. On the next $45,192 to reach $90,000 a rate of 20.5% is applied, equal to $9,264.36, for a total tax of $16,056.36 in Federal tax, or a 17.8% average tax rate. On the first $45,282, 15% federal tax is paid, equal to $6,792. This doesn’t mean that you will earn less total income as you move into a higher bracket, it just means that for every extra dollar you earn, you won’t keep as much as the first dollar you made. This means that there are multiple tax brackets, and as you move up the brackets, you pay higher taxes on the additional income. In Canada, we have what is called a progressive tax system. In today’s post, I’m going to give you some exciting (sarcasm!) insights into the world of taxes so that you can make the type of personal financial decisions that help you pay just what you need to and not more. However, at the end of the day, you don’t want to pay more tax than you need to. We all pay taxes in some way or another, and of course, taxes help pay for valuable services and infrastructure. Welcome to tax season! Like the old saying goes: nothing is certain in life but death and taxes.