How to Calculate a Tax Refund in Canada


For most ordinary Canadians, preparing and filing a tax return is not complicated. If your information is simple and you have only one source of income (your job), and your only deductions are your CPP/QPP and EI contributions, then your main concern will be whether you will get a tax refund or end up owing tax. If you make a contribution to your Registered Retirement Savings Plan (RRSP), you can claim that contribution as a deduction against your taxable income and this will usually end up triggering a tax refund. Here is how to calculate that refund.

Things You'll Need

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  • Gather your income tax documents and receipts. Your T4 slip will state your employment income, income tax deducted at source and your CPP/QPP and EI contributions. Make sure you also have your RRSP contribution receipts.

  • Subtract your RRSP contribution amount from your employment income. This will be your taxable income.

  • Get a tax package for the current tax year. If you do not have the one that the Canada Revenue Agency (CRA) sends you in the mail, get one on the CRA website under "Individuals". Make sure to pick the package that corresponds to your province of residence, as you will have to calculate your provincial income tax as well as your federal income tax.

  • Calculate your federal non-refundable tax credits using Schedule 1 - Federal Tax. Add up the personal amount, your CPP/QPP and EI contributions, and multiply by the factor given on line 338.

  • Use Schedule 1 - Federal Tax, to calculate your federal income tax payable. Enter your taxable income in the appropriate column and perform the calculation. Subtract your federal non-refundable tax credits to determine your net federal tax payable.

  • Calculate your provincial non-refundable tax credits and provincial income tax payable using the corresponding provincial T1 general worksheet form 428.

  • Add the federal and provincial taxes payable together. If that total is less than the income tax deducted at source showing on your T4 slip, you are owed a refund.

  • Subtract the total tax payable from the income tax deducted at source to determine the amount of your refund.

Tips & Warnings

  • Verify if your CPP/QPP or EI contributions are higher than the maximum for the year. If they are, then you are entitled to a refund of those excess contributions and should claim it on your tax return.
  • Remember that the above steps only take into account simple income and deductions. Don't forget to include your income from all sources and any additional deductions you may be able to claim when doing this calculation.

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