Retained Earnings

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.

Canada taxes income in graduated brackets, so only the income above a threshold is taxed at that bracket's higher rate and moving up a bracket never reprices the income below it. There is one federal set of brackets and a separate set for each province and territory, and the thresholds are indexed to inflation every year. Look up the current figures for your province on the CRA rate tables rather than relying on an older list.

No. A refund is your own overpaid tax coming back, so it is not reported as income and does not reduce your income-tested benefits. Interest the CRA pays when a refund is late is treated differently: that interest is taxable and belongs on the return for the year you receive it. A corporate refund works the same way, though refund interest is income to the corporation. Keep the notice of assessment with your records.

Federal taxation is the part of the system Parliament sets and the CRA administers: personal and corporate income tax, GST, excise duty and customs. Each province levies its own income tax as well, and the CRA collects provincial personal tax alongside the federal amount on one return everywhere except Quebec, which administers a separate provincial return. That is why your total rate has two components even though most people file only once.