Zero-Rated Supply

Income tax starts once taxable income passes the basic personal amount, and a separate provincial or territorial amount applies on top, so the break-even point shifts every year with indexation and differs by where you live. Look up the current amounts on the CRA site or in the year's return package. Credits for tuition, disability, pension income or dependants push the point higher. Filing can still be worthwhile or required with no tax owing, for benefits and credits.

Federal tax is the share of income tax that goes to the federal government, charged on taxable income in graduated brackets that are the same everywhere in Canada. Your total bill is that federal amount plus your province or territory's own tax, less the credits you claim. Payroll deductions shown on a T4 cover both layers. Quebec residents receive a refundable abatement of their federal tax because Quebec opted out of certain federal-provincial programs and funds them itself; separately, Quebec also collects its provincial tax through its own return.

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.

A write-off is everyday language for claiming a deduction. A legitimate expense reduces the income you are taxed on, so it saves tax at your marginal rate, not the full amount spent. Only expenses incurred to earn income qualify, they must be reasonable, and you need receipts. Some claims are capped by rule: business meals and entertainment are deductible only in part, and the cap applies to the sales tax and the tip as well as the food, with a few exceptions such as employer-hosted events and long-haul driving.