Tips & Advice

How to Calculate Your Tax Refund

Your Canadian income tax refund depends on your total annual income, your deductions, and how much tax you have already paid (or had withheld at source). Key elements of the calculation include, but are not limited to, the applicable Federal and Provincial tax rates, whether you have Non-Refundable Tax Credits, or whether you can subtract any losses from your income.

When completing your Income Tax and Information Return, you will need to enter the information from your tax slips and other sources to determine if you are eligible for a refund. If you are using tax software such as TurboTax, your information will automatically be transferred to the correct line of the tax return, and calculated accordingly.

How To Establish Your Total Income

To calculate your refund, add up your income from all sources to get your total income. This amount will be shown on Line 15000 – Total Income.

Some examples of income and the slips they are reported on are:

Other income sources not reported on slips include:

Deductions to Calculate Net Income

While you can fill out the income tax return and perform detailed calculations to get the exact amount of your refund, you can get a good estimate by including only the major amounts in your calculation.

The major deductions available in the net income section of the income tax return include include:

Natalie Fong-Yee, CA, of the Fong-Yee Professional Corporation based in Toronto, says that each person’s tax situation is different, but that many people qualify for substantial income tax refunds.

“The biggest factor in receiving a refund is a large RRSP contribution and having too much tax deducted from your salary,” she explains. When you contribute to an RRSP or make other major deductions, you can subtract the amounts from your total income and get your net income. This ultimately affects your tax payable.

Losses From Other Years

Normally you calculate your income tax based on your net income, but sometimes you can subtract losses you incurred in previous years, therefore affecting your Taxable Income – Line 26000.

There are two types of losses that CRA keeps a record of and includes on each year’s Notice Of Assessment (NOA).  You can deduct these amounts to reduce your net income and calculate your taxable income. When using tax software, you’ll need to manually input these losses in order for them to be applied in the correct spot.

Federal and Provincial Income Tax

Once you have established your taxable income, you can calculate how much tax you have payable. You’ll need to know both the Federal and Provincial tax rates of the year that are applicable to your income level. A complete list of tax rates for the current and previous tax years can be found in this link: Canadian income tax rates for individuals – current and previous years.

All provinces (with the exception of Quebec*) use a separate schedule in the tax return that reflects the provincial tax rate percentages. This is titled Form 428 and is specific to each province with the Non-Refundable Tax Credits and tax rates. For example: Ontario residents complete Form ON428, Manitoba residents complete Form MB428. The amount from this form is entered on Line 42800 – Provincial or Territorial Tax

You then add the federal and provincial taxes payable on that amount shown on Line 26000 to get the total basic tax you owe for the year.

*Québec residents complete a separate provincial tax return – the TP-1. You can use this calculator from TurboTax to estimate your tax refund: Quebec Income Tax Calculator. Instructions on completing the TP-1 are available from Revenu Quebec.

Subtracting Non Refundable Tax Credit (NRTCs) Deductions

There are numerous deductions called Non Refundable Tax Credits or NRTCs that you can use to calculate your exact tax due and your refund.

If you want an estimate of your refund, the four major Non Refundable Tax Credits and where they are shown on your Federal tax return are:

You multiply the total of these amounts by 0.15 and subtract the result from the total basic tax to get the total tax you have to pay.

Depending on your province of residence, you may have a similar schedule for provincial credits, and you may have to calculate and subtract them the same way. Consult this list to determine which Provincial or Territorial Non-Refundable Tax Credits you are eligible for based on your province of residence on December 31st.

Calculating Your Refund

Once you calculate your tax due or owing, the refund depends on how much tax you have already paid by deductions on your salary and by installments.

You can find these amounts on your tax slips and can subtract them from your tax due. If the result is negative, the government owes you money and represents the refund you can expect.

Two other factors that could influence your refund are:

References & Resources