Statement of Cash Flows

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.

Tax exempt describes an amount or a transaction that tax does not apply to at all, which is different from a deduction or credit that merely reduces tax. Common examples are supplies that are exempt or zero-rated for GST/HST, investment income earned inside a TFSA, and specific receipts Parliament has excluded from income. Registered charities and non-profits can be exempt from income tax while still carrying filing duties. Exemption is never automatic; the rule must fit your facts.

You claim credits on your return, and they are applied against the tax already calculated on your taxable income. Non-refundable federal and provincial credits are each worked out by multiplying the eligible amount by the lowest rate for that jurisdiction, so the same claim is worth different money at each level. Unused amounts are lost at year end unless the particular credit allows a carry-forward or a transfer to a spouse. Refundable credits are paid whether or not tax is owing.

There is no single figure, because the amount depends on your income, your province and which taxes are counted. Studies that quote an average usually bundle income tax, payroll contributions, sales tax and property tax together, which is why published numbers differ so widely. For your own position, divide the total tax shown on your notice of assessment by your total income to get your effective rate, then compare that with later years rather than with a national average.