The Canada Pension Plan is a mandatory contributory pension: employees and employers each contribute on earnings, and the self-employed pay both shares, funding a retirement pension.
CPP contributions are withheld on employment earnings between a basic exemption and an annual maximum, with the employer matching the employee's contribution dollar for dollar. The self-employed pay both halves through their personal return. Contributions build entitlement to a retirement pension, plus disability and survivor benefits.
For owner-managers, CPP is a key factor in the salary-versus-dividend decision: paying salary triggers CPP (a cost, but also a benefit and forced saving), while dividends avoid it. Quebec operates its own parallel plan, the QPP.
An employee earning $70,000 has CPP withheld up to the annual maximum, and the employer matches it. A self-employed person earning the same pays both the employee and employer portions through their T1.
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A tax return is the annual filing that reports your income, deductions and credits to the CRA so the final tax for the year can be settled. Payers withhold tax during the year and the return reconciles that against what you actually owe, producing either a refund or a balance to pay. For 2025 returns filed in 2026, refunds usually arrive in about two weeks for an online return, while a paper return runs on a considerably longer standard because it is handled manually.
Income tax is tax charged on the income you earn in a year, levied by both the federal government and your province or territory. Rates are graduated, so successive slices of taxable income are taxed at higher rates, and credits such as the basic personal amount reduce the tax calculated. Employment income is taxed through payroll withholding and settled on your T1 return. Quebec residents also file a separate provincial return with Revenu Quebec.
Multiply the assessed value of the property by the tax rate for its property class. Assessment is set by a provincial assessment authority on its own cycle and increases are often phased in, so the value lags the market. The rate is set each year by the municipality out of its budget, with an education portion added by the province. Both figures appear on your notice, which is why identical homes in different municipalities carry different bills.
A tax credit reduces the tax you owe, whereas a deduction reduces the income the tax is calculated on. Non-refundable credits, such as the basic personal amount or tuition, can bring tax down to nil but pay nothing beyond that. Refundable credits, such as the GST/HST credit, are paid out even when no tax is owing. Almost every credit is claimed on the return, so filing is what releases the money.
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Reviewed and fact-checked by Udit Gupta
Ex Big 4 — Ernst & Young, Deloitte · International & cross-border tax specialist · CPA Canada (In-Depth Tax Program) · Chartered accountant, ICAI & MIA
Udit Gupta has over 15 years of experience helping corporations and business owners with corporate structuring, corporate tax filing, bookkeeping, payroll, GST/HST, cross-border tax and CRA representation. Big 4 trained at Ernst & Young and Deloitte, and qualified as a chartered accountant in India and again in Malaysia, he founded his accounting practice in 2014 to serve entrepreneurs, startups and non-resident business owners across Canada. View full member bio.
The Institute of Chartered Accountants of India — member 521458 · Malaysian Institute of Accountants — member CA 44667 · Ex Big 4: Ernst & Young, Deloitte · CPA Canada (In-Depth Tax Program), completed 19 Dec 2023 · In-Depth GST/HST Part I, 12 Jul 2022 · Part II, 5 Jul 2023
Editorial policy. Every page is researched against primary sources — the Income Tax Act, CRA publications and CPA Canada guidance — and every rate or threshold is stated with the tax year it applies to.
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