Invoice

The basic personal amount is a non-refundable credit that shelters a base level of income from federal tax, so income below it carries no federal tax. The amount is indexed every year, and the enhanced portion is phased out across the second-highest federal bracket, so taxpayers in the top bracket receive only the base amount. Each province and territory sets its own version. On Form TD1 you claim it so your employer withholds less; claim it with one employer only, or too little tax is withheld.

Current and prior-year forms and publications are free to download from canada.ca, and tax software builds most of them for you as you enter your information. You can also order a paper package by phone or pick one up at participating postal and service outlets during filing season. Which forms apply depends on your situation: a T1 with your slips for employment income, T2125 for self-employment, a T2 for a corporation, T1-ADJ to change a return already filed.

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.

Canadian sellers advertise pre-tax prices and add GST, HST or provincial sales tax at the till. Nothing requires tax-included pricing, rates differ by province, and taxability depends on what is sold: one trip to the till can mix fully taxable goods, zero-rated goods such as basic groceries, and exempt supplies. Fuel is the exception — the price posted at the pump already contains the fuel taxes and the GST or HST, so nothing is added when you pay.