If you are expecting a tax refund, you can get a fairly accurate idea of how much you will be receiving before you actually file your tax return. Sure, you could use free online tax preparation software like TurboTax and fill in a couple of key facts and you should see fairly quickly and easily if you are getting money back or will owe money. Or you can ask for a Real Tax Expert Advice for more information on how to report your income or apply deductions. But what information is most important in providing that snapshot?

Total Income

Your total income is just what it sounds like — all of the money you brought in for the year. It includes any money you earn from employment – including self-employment, commissions, bonuses, gig-work, or casual employment and tips. It also includes the income you earned from other sources. For instance; investment activities like dividends, stock options, interest, renting a property, capital gains, selling capital properties, etc. are amounts you would add into your total income.

What is the difference between deductions and credits?

Deductions are applied to your total income to reduce your taxable income before you apply your federal and provincial taxes. Credits are applied after you calculate your taxes to further reduce your owing amount or result in a refund.

Some Common Deductions Include:

• The Registered Retirement Savings Plan (RRSP) deduction
• Child care expenses
• Moving expenses
• Support payments you make for a spouse
• Employment expenses (T2200 required)
• Any deductions related to self-employment work

You can subtract deductions from your total income to get your taxable income. If your deductions are higher than your earned income, your taxable income would be considered $0. For instance, say you earned $20,000, and your child care expenses, moving expenses, and employment expenses totalled $23,000. Your taxable income would be $0, as opposed to -$3,000. It helps to know which deductions you can carry forward, like moving expenses, to future years rather than claiming the total amount in one year and losing the remaining balance. TurboTax standard products or higher can help you optimize the use of your deductions.

Your Federal Tax Bracket Depends On Your Taxable Income

For 2024;

• 15% on the first$55,867 of taxable income, plus
• 20.5% on the next $48,534 of taxable income (on the portion of taxable income over 55,867 up to $111,733),plus
• 26% on the next $111,733 of taxable income (on the portion of taxable income over $111,733 up to $173,205),plus
• 29% on the next $173,205 of taxable income (on the portion of taxable income over 173,205 up to $246,752), plus
• 33%of taxable income over $246,752

Visit the CRA link for other provincial tax rates.

Non-Refundable Credits and Taxes

What is the difference between non-refundable and refundable tax credits?

Non-refundable tax credits reduce your tax liability to zero but don’t create a refund (no negative amount). The refundable tax credits reduce your tax liability and create a refund if it results in a negative amount.

The non-refundable tax credits you claim on your Income tax and Benefit return are similar to deductions since these credits can reduce your tax liability, but cannot make you go from owing taxes to receiving a refund. However, you are allowed to subtract 15% of the total amount of your non-refundable tax credits from your tax amount as determined by your tax bracket.  This amount is your net federal tax.

The basic personal amount is a large chunk of your non-refundable credits and this amount is indexed which means it varies by tax year.

You also receive additional credit for your spouse or common-law partner, and for your children.  You can receive credits for many other expenses, such as medical expenses, tuition, donations. Here is a list of credits based on the province you live in.

For example, if your non-refundable credits total $20,000 and your taxable income is $40,000 (you are in the first tax bracket): ($40,000 x 15%) – ($20,000 x 15%) = $6,000 – $3,000 = $3,000 in net federal tax.

Disability Tax Credit

One of the non-refundable tax credits that is The Disability Tax Credit (DTC) that helps persons with disabilities or their supporting persons reduce the amount of income tax they may have to pay.

An individual may claim the disability amount once they are eligible for the DTC. If they have a low-income and they won’t be able to benefit from this credit, they can transfer it to their partner or a family member who takes care of them. The eligibility to transfer should be approved by CRA and noted in the taxpayer’s account. You can check your DTC status on the My Account website.

Being eligible for the DTC can open the door to other federal, provincial, or territorial programs such as the registered disability savings plan, the working income tax benefit, (now called the Canada Workers Benefit), and the child disability benefit.

Refund or Balance Owing

How do I know if I owe taxes or getting money back?

After you determine your net federal tax, and provincial tax you report them on your Income Tax and Benefit return line 42000 and line 42800 then add both amounts on line 43500. This is the amount you owe in taxes, prior to any refundable credits or overpayments.

To determine your refund or amount owing, you would add all taxes paid from different slips sources and report them on line 43700 to be subtracted from your calculated total tax payable on line 43500. Then you can apply other refundable credits such as:

• overpayments on EI or CPP
• working income tax benefits
• Refundable Quebec abatement
• Climate Action Incentive
• medical expense supplement
• Refund of investment tax credit
• Employee and partner GST/HST rebate
• Eligible educator school supply tax credit
• Tax paid by installments
• Provincial or territorial credits on Form 479

Of course, there is the TurboTax Canada income tax calculator, to help guide you through your numbers.  Then again, if you want to know whether you are getting a refund or if you owe, you might as well just complete your return through TurboTax.  With options available ranging from doing the return completely on your own to having a TurboTax expert prepare your return for you – with options in between – why would you go elsewhere, then with Canada’s most popular tax preparation software, who has been helping Canadians since 1993.