Need to know Canadian tax return amount?

Question

I'm a contractor working full-time for a salary of 2000$ monthly, $24000/annually. I don't have any of my taxes deducted, but will have to send in all my invoices at the end of the year and pay everything all at once. I'm wondering, how much will I be charged in taxes? I have no dependents, just graduated a few months ago. I'm currently putting aside about $400/month to be on the safe side, but it would be great to know exactly what kind of a bill I'm gonna be hit with..

Answer 1

This answer assumes that $24,000 will be the correct amount of your income AFTER deductions related to your employment. It doesn't take into account any deductions you may have such as medical expenses, tuition or education amounts, or RRSP contributions.

Step one: Canada Pension Plan

Contributions to the CPP are mandatory on all self-employment income over $3,500 at a rate of 9.9%. The reason we calculate this first is that the amounts paid here are credits against your federal and provincial taxes.

On $24,000 income, your CPP Payable would be:

(24,000 - 3,500) * 9.9% = 2029.50

Step two: Federal Income Tax

The Federal Tax rate is 15% of income over $9,600 plus other deducations (CPP in this case). Your Federal tax payable would be:

(24,000 - 11629.50) * 15% = 1855.57

Step three: Provincial Tax

You haven't said which province you're living in, so I'm going to assume Saskatchewan, which currently has the highest taxation rates in the lowest bracket.

The SK basic exemption is 8,945 which is added to the CPP amount to get the total exemption of $10,974.50. Your SK tax payable would be:

(24,000 - 10,974.50) * 11% = 1,432.81

Step four: Total payable

We now add the three calculated amounts together.

2,029.50 - CPP

1,855.57 - Fed tax

1,432.81 - SK tax

5,317.88 - Total payable.

The $400/month your putting aside would just about cover this.

Also, just to let you know. If you repeatedly have amounts payable over 3,000, the CRA will demand that your taxes be paid quarterly through the year rather than having a large amount to pay at the end of the year, essentially changing the due date for you to pay your taxes.

Answer 2

Assuming that you live in Ontario, your estimated 2008 federal and provincial tax payable is about $1,200 on income of $15,000 ($24000 less personal tax exemption amount of $9600).  If u live in other province, here is the link for your calculation: http://www.morningstar.ca/globalhome/Mar...