If you need to estimate your Canadian income taxes during the year before making an investment decision, use the simplified spreadsheet provided in this post. For example, you may have to decide the impact of taking capital gains this year, selling stocks or taking out an RRSP.
As mentioned in Impact of Tax Credits on Average Tax Rate, the actual average tax rate is determined by your tax credits, and deductions and not just your marginal tax rate.
If you are concerned about the impact of any income that is additional to your normal income (such as capital gains or dividends), and do not want to use the marginal rate, there are two options:
1) If you used a software application for your taxes last year, open it and record the taxes you paid. Then include the additional income and record the taxes. Compare the taxes and determine the change. As explained above, the increase will be the added income times the marginal tax rate for the tax bracket, unless some other tax implications happen, such as surtaxes, hospital taxes and clawbacks.
2) If you cannot do the above (you may no longer have the application or data, you may have done it online and have no access to the data or you may have manually completed the tax form), you can estimate your taxes by using the spreadsheet provided in this post.
To use the spreadsheet, click on Download Spreadsheet. It has income tax data for 2014 and Ontario.
The spreadsheet has two pages. You can switch between them by clicking on the Tab at the bottom of the page. The Income&Taxes page is where you enter your income and deductions. It uses the same format as the Federal T1 and Schedule 1 forms and the Provincial 428 form. However, some of the seldom-used items are not included, but there is a place to include the values, or you can insert any lines you want. The Brackets page includes the tax tables and calculations for the Age and Pension Income amounts.
A few of the values are set by the Federal and Provincial authorities, and are preloaded into the spreadsheet. You can change them for future years or enter data for your province, if it is not Ontario. See the sections below for how to do this.
You can include your spouse, if desired, as there are columns for doing this. On line 5 of the spreadsheet, you can enter the names of the people. On lines 8, 9 and 10, a summary of the Total Income, Total Tax Payable and % of income are kept visible at all times because the Income&Taxes page is split and frozen. That is, only the entry area is scrollable.
Using the Spreadsheet
Just start at line 11 of the spreadsheet on the bottom pane of the Income&Taxes page. The Age amount is also automatically calculated but only if, on line 11, you enter Yes into the Eligible for Age Amount cell.
To make it easy to enter certain income amounts, you can enter the amount received and indicate how often they are received. The total for the year is then automatically entered. This simplifies entering employment (federal line 101), OAS (113), CPP (114), pensions (115) and dividends (120).
Note that any dividends that are to be entered on federal line 120 is to be the actual amount received. The grossup and tax credit are automatically calculated.
You can also itemize Pensions, Dividends, Interest, Capital Gains and Other Income by inserting new lines as needed. This makes it easy to keep track of what you are including.
OAS clawback (line 235) which can affect retired people, is automatically calculated.
Also for retired people, the Elected split-pension amount can be set in federal line 116. The corresponding Deduction at federal line 210 is automatically included.
If the federal line you want is not shown in either the Income and tax credits area, look for a catch-all line (such as the line below 214 in income (Other deductions) and below 322 in tax credits (All Other not included above) and use them. If you still want to have your own item, just insert a row and enter the description and the value.
In the Federal and Provincial Non-refundable Tax Credits, the Basic personal amounts have been entered as has the multipliers. Do not change them except as mentioned in the customization sections below.
The Spousal amounts have not been entered and are not calculated as they are difficult to do. You may have to use pencil and paper or guess at the amount.
The same is true for Medical expenses and you will have to refer to the calculations on the tax forms.
As you enter data, the totals at lines 8 and 9 of the spreadsheet will change as will totals throughout the spreadsheet.
Once you have entered all the data for your existing income and deductions, you can do a what-if analysis for changes to income. There are two ways to do this.
1) You can save the spreadsheet and then make a copy. Open both the original one and the copy. Then make changes to the copy and see what happens. Compare the results.
2) You can copy and paste only the values of the lines in the summary to the bottom of the page. Then make your changes and compare the summary to what you copied.
Customizing the Spreadsheet for your Province
If you are in a province other than Ontario, you should make the changes given below to ensure that you have the correct tax rates and other values. Each of the cells to be changed are outlined.
1) Click on the Income&Taxes tab at the bottom of the spreadsheet, if this pane is not already selected. Then, for Person 1, change the values in the provincial area for line 5804-Basic personal amount, Multiplier percent and Dividend Tax Credit percent. Unless you have made a change to the other person’s values, they will be automatically changed to these new Person 1 values.
2) Click on the Brackets tab at the bottom of the spreadsheet. Then, in the Provincial tax table, change the Tax Brackets and the Rates. For the Provincial Line 5808 – Age Amount, change the Maximum claim and the Base Amount. Finally, for the Provincial line 5836 – Pension income amount, change the Maximum for Person 1. Person 2 will change automatically.
There is no single website that has all of these values for all the provinces. For your own province, you can go to Canada Revenue Agency’s General income tax and benefit package for the current year and then navigate to your province and thence to each form of interest.
I have to do this for every province to update RetireBase and FinanceBase each year. I have included the tax rates and brackets on the spreadsheet for Canadian Marginal Tax Rates – 2014. Go there and download the spreadsheet and the values are in the first four columns. For the other values, they are on the Brackets page of the spreadsheet for this post. Scroll down to line 91 to see the table of values. They are also copied below.
|Basic Personal||Multiplier %||Dividend Tax Credit %||Age Amount Maximum||Age Amount Base||Pension Income|
|Newfoundland and Labrador||8,451||7.70||11.00||5,395||29,563||1,000|
|Prince Edward Island||7,708||9.80||10.50||3,764||28,019||1,000|
Changing the Federal Values for a Different Year
The values loaded into the spreadsheet are for 2014. To use those for a different year, do the following:
1) Click on the Income&Taxes tab at the bottom of the spreadsheet, if this pane is not already selected. Then, for Person 1, change the values in the federal area for line Dividend Grossup Extra, line 300-Basic personal amount, Multiplier percent and line 425-Dividend Tax Credit percent. Unless you have made a change to the other person’s values, they will be automatically changed to these new Person 1 values.
2) Click on the Brackets tab at the bottom of the spreadsheet. Then, in the Federal tax table, change the Tax Brackets and the Rates. For the Federal Line 301 – Age Amount, change the Maximum claim and the Base Amount.
It should be obvious that the spreadsheet provided is not a substitute for Canadian government certified software as it does not have all of the forms required and only includes the most used items. While the calculations are reasonably straight-forward, you can make changes that create errors. The spreadsheet provides a fast and easy method for estimating taxes that can be used at no charge throughout the year and can be easily customized. You are urged to use an application of your choice from the certified list to properly calculate your taxes. Please read the Disclaimer page for more information.