Affordable Bookkeeping Reconstruction for CRA

Canadian income tax is built up in layers. You total your income for the year, subtract the deductions you qualify for to arrive at taxable income, then apply the federal brackets and your province's brackets to that figure. Each bracket rate applies only to the income sitting inside it, so earning more never retaxes the dollars below. Non-refundable credits, starting with the basic personal amount, come off the tax afterwards. Look up the CRA bracket table for the tax year you are filing.

A tax deduction is an amount subtracted from your income before tax is worked out, so it reduces the income being taxed rather than the tax bill directly. Its worth depends on your marginal rate: the higher the rate, the more the deduction saves. Common examples are RRSP contributions, child care costs, union dues, moving expenses and business expenses. Credits work the other way, reducing the tax calculated on that income.

GST or HST is calculated on the selling price of a taxable supply and shown separately on the invoice. Place-of-supply rules decide which province's rate applies, and that is usually where the customer receives the goods or service rather than where you operate. A registrant remits the tax collected less input tax credits for GST or HST paid on business purchases, so the amount sent to the CRA with each return is the net figure, not everything collected.

The business number is the single identifier the CRA uses for your business, with a separate programme account opened under it for each obligation: GST/HST, payroll deductions, corporate income tax, import and export. Register through Business Registration Online, by phone or by mail, or receive one automatically when you incorporate federally. You need it before you can remit payroll or file GST/HST. Provincial registration is separate in some provinces, notably Quebec, where Revenu Québec administers its own accounts.

Make it routine rather than an April scramble. Record income and expenses monthly, keep receipts and statements for six years from the end of the tax year they relate to, and check CRA My Account for slips, notices, balances and instalment reminders. Pay instalments when the CRA asks for them. Set aside a share of self-employment income as it arrives, and register for direct deposit. A mid-year review is when planning can still change the result.

A flat monthly car allowance is generally taxable, added to employment income on the T4 with source deductions taken. A per-kilometre reimbursement is different: if it is based on business kilometres actually driven at a reasonable rate, it is not taxable. For 2026 the CRA treats 73 cents per kilometre for the first 5,000 kilometres and 67 cents after as reasonable, with 4 cents more in the territories; the 2025 rates were 72 and 66 cents.

Usually not. Most financial services, including account maintenance, interest, loan arrangement and transfers of money, are exempt supplies, so no GST/HST is charged and the bank claims no credits on them. Some charges billed on the same statement are taxable: safety deposit box rental, certain administrative or advisory services, equipment rental and merchant processing hardware. Read the statement, since taxable lines show the tax separately, and claim input tax credits only on those.

From the federal and provincial personal tax credits return you fill in when you start a job, which tells payroll which credits you claim, combined with the CRA's withholding tables for your pay frequency and your province of employment. Hand in an updated form when your situation changes, and ask for extra tax to be withheld if you have other income that is not taxed at source. Your T4 reports the year's totals.

Chargeable income is the term other countries use for the amount actually subject to tax. Canada uses taxable income instead: you total your income from all sources, subtract permitted deductions such as RRSP contributions and eligible employment or business expenses, and the rates apply to what is left. Credits, including the federal basic personal amount, then reduce the tax itself rather than the income. If a foreign form asks for chargeable income, your Canadian taxable income is the closest match.

Most financial services are exempt from GST/HST, so ordinary bank charges such as monthly account fees, interest and transaction charges carry no tax. Administrative and non-financial services a bank sells, such as safety deposit box rental or certain reports, can be taxable. Check the statement, which shows any GST/HST charged. For a business, exempt fees generate no input tax credit, so they are recorded at full cost.

Because two different governments administer the two taxes. In British Columbia, Saskatchewan and Manitoba the CRA collects the 5% federal GST (the rate since 1 January 2008 and unchanged for both the 2025 and 2026 years) while the province collects its own PST or RST, each with a separate registration, filing frequency and deadline. Quebec is the exception: Revenu Quebec administers the 9.975% QST (the rate since 1 January 2013, current for 2025 and 2026) and also the GST for most Quebec-resident registrants, so they file one combined return.

Interest on an ordinary savings account is fully taxable in the year it is credited, and the bank normally reports it on a T5, though no slip is issued for small amounts of interest — the income is reportable either way. No exemption exists to claim against it. The only real answer is to hold the money in a registered account instead: a TFSA, where the interest is never taxed, or an RRSP or FHSA, where it is sheltered until withdrawal. Interest in a joint account is taxed to whoever supplied the funds.