A lot can happen from year to year, creating uncertainty around your life and your tax situation. Maybe you started your own business, recently got married, moved provinces, or experienced some unforeseen COVID-related changes.
In any event, we want to ensure you feel supported when it comes to knowing whether you’ll get a tax refund, and what that might look like.
- Your tax refund depends on your total annual income, deductions, credits, and how much tax you’ve paid.
- File your taxes online and sign up for direct deposit to receive your refund faster.
- Update your personal information with the CRA as your situation may change from year to year.
How does a tax refund work in Canada?
Whenever the Canada Revenue Agency (CRA) collects more income tax from you than you owe, you’ll receive the excess amount back as a refund. Think of it as extra money you didn’t know you had just like the $20 bill you found in last year’s winter coat!
Your refund amount is calculated based on your overall financial picture. This picture includes your total income, the taxes you’ve paid throughout the year, and whether you have enough deductions and other credits to warrant a refund. It never hurts to follow up with the CRA on unused deductions you can carry forward to future years.
Want to learn how to make the most of your tax return and get your maximum refund? Here’s how.
Am I eligible for a tax refund?
The good news is everyone could be eligible for a tax refund but this depends on a few factors. Say you made $35,000 and you prepaid $5,000 in taxes. If your taxes due on your return are only $4,000, you’ll get the extra $1,000 back as a refund when you file.
Depending on your employment income, dependants, and which tax credits you are entitled to, your tax refund equation will look different. Using TurboTax ensures you get your maximum refund possible when you file.
Are tax refunds considered income?
Ah the joyous occasion of getting back your own money! Tax refunds aren’t income, they are literally your own money being returned back to you, and so they aren’t taxable.
If you received a tax refund with a little extra interest on top, that extra is going to be taxed as income for the year you received it. So, don’t forget to include refund interest listed in your Notice of Assessment (NOA) as income because that is taxable.
How do I calculate my tax refund?
Here’s a high level breakdown on how to calculate your tax refund amount in four steps:
- Add up all of your different income streams, such as work, investment, or side hustle cash. This is your total income.
- Subtract all of your tax deductions like RRSP contributions from your total income to get to your taxable income.
- Multiply your taxable income by your tax rate to see how much taxes you owe.
- Compare the taxes you already paid with the taxes you owe. If the amount paid is higher, you can expect a refund!
If you’re using tax software such as TurboTax, the information you enter will automatically be transferred to the correct line of the tax return and calculated accordingly.
Here’s a high level breakdown on how to calculate your tax refund amount:
- Start by calculating your total annual income by adding all employment and investment earnings.
- Then apply all deductions you’re eligible for to that sum (taxable income) to reduce it.
- Finally, subtract your total credits (Line 48200) from your total payable amount, or taxes owed (Line 43500).
- If the resulting number is negative, enter it on Line 48400 of your return and you will get a tax refund in that amount. If it’s positive, you must pay this balance owing by the tax year deadline and will instead enter that amount on Line 48500.
Free Income Tax Calculator 2022
Fill in your income and expenses and see your refund or taxes owing estimate.
When can I expect my tax refund?
If you filed online using NETFILE, it can take up to 2 weeks to receive your tax refund. Signing up for direct deposit on CRA My Account will get you your money 3-5 days faster than receiving a cheque in the mail. If you filed by mail, it may take up to 8 weeks.
If you live outside Canada and file a non-resident personal income tax return, it may take up to 16 weeks to receive your refund.
What is the maximum tax refund I can get in Canada?
Your maximum refund is based on your total income, the tax credits you claim, as well as how much tax you’ve already paid, depending on your personal situation.
Most importantly, tax refund amounts can look different for every tax payer. Here are a few different scenarios that show how the tax equation is different for everyone:
- An employee paying taxes all year may receive a refund if they make an RRSP contribution.
- A student may save their tuition credits and student loan interest as future deductions to get a refund when they’re earning more.
- The self-employed have to set aside a part of each pay and prepay for any taxes due before they file, claiming deductions can help reduce that amount.
- A parent can claim child care expenses to receive benefits for their children in the form of a refund.
- A senior who shares their pension with their spouse may save taxes overall as a couple or even get a refund.
If you don’t agree with your tax refund amount, you can review your NOA for changes or errors, and contact the government if you find anything. If this seems like a daunting task, sign up for Audit Defense before you file your taxes and TurboTax will follow up with them for you.
Where can I check my tax refund status?
You’ve filed your taxes, you’re expecting a refund, and you just can’t take the suspense!
When will your funds be released? Your tax refund is set free along with your NOA, which is either mailed to you, or posted online to your personal CRA My Account.
You can check your refund status online, by logging in, or, if it’s been more than eight weeks since filing, call 1-800-959-1956 to check the status with the CRA directly.
Why tax refund is delayed?
The last thing you want to do is wait for your money. If it feels like your refund is taking a trip around the sun, here are six possible reasons your tax refund is delayed:
- The CRA decided to review your tax return before issuing your refund.
- You filed late. If you filed after the tax deadline, this can extend your waiting period.
- You have an outstanding balance on amounts owing. If you owe money from another time, the CRA may keep part of your refund for payment of a debt.
- You didn’t sign up for direct deposit. A paper cheque is what you’ll get which takes longer, so signing up for direct deposit is the fastest route to your money!
- You failed to file for certain tax years.
- Your personal details (address, email, etc.) are incorrect or out of date. Learn how to change your tax return after you’ve filed.
If you suspect this could have happened to you, sign into your CRA My Account or give the CRA a call directly.You can verify if there are any pending requests for information or outstanding issues which are delaying your refund.
Frequently Asked Questions
This depends on your personal situation and whether you qualify for one of multiple credits that can generate a refund for you. Here are some examples of credits to consider applying for:
- If you’re caring for young children, claim the child care expense deduction.
- If you’re taking care of an older parent, spouse or sibling with a disability, claim the Canada Caregiver Creditor the eligible dependant deduction in certain situations.
You may also qualify for a transfer of tuition credits from your spouse, child or grandchild which can also help reduce your tax bill.
If your situation hasn’t changed year over year, it’s safe to expect to receive or pay around the same as last year. If you’ve already received some of your tax forms, or you have your final 2022 paystub on hand, you can use the Turbotax Canada Income Tax Calculator to estimate this year’s return.
If you file online you can receive your payment as quickly as two weeks, if you are signed up for direct deposit, it is even faster, you may see a deposit in just a few days after filing.
As soon as you file online, the CRA will update your CRA My account, which is where you’ll be able to track your refund status online. Once they assess your tax return, you will receive a notification. If you signed up for direct deposit, you’ll receive your refund faster than the CRA issuing you a paper cheque.