If you choose to live in Ottawa during your working holiday you’ll need to pay both federal tax and Ontario provincial tax.
The amount of tax you pay will depend on how much you earn and whether or not you are entitled to claim the tax-free threshold.
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As a working holidaymaker you are considered a non-resident for tax purposes. However, if you earn income outside Canada in the same tax year you have to declare it on your tax return. You’re required to file a tax return by the 30 April deadline each year.
If you work in Canada in 2021 then you’ll need to file your tax return by 30 April 2022. However, you can file from February 2022, and the sooner you file the better.
How much tax will I pay?
If you’re a non-resident, you will only pay tax on the income you earn in Canada. You’ll have to pay federal and provincial tax on your income above a certain amount. This is applied to your tax return to reduce the amount of income you’re required to pay tax on.
So for example, if you paid tax but earned under this amount, you may get a refund of all the tax you paid when you file your tax return.
The tax-free threshold for federal tax is $13,808 in 2021, so if you earn anything over this amount you’ll need to pay federal tax on it.
2021 Federal Tax Rates
|Taxable Income 2021 Tax Brackets||Federal Tax Rate|
|On the first $49,020 of taxable income||15%|
|From $49,020 up to $98,040||20.5%|
|From $98,040 up to $151,978||26%|
|From $151,978 up to $216,511||29%|
You will also need to pay provincial tax over the Ontario Basic Personal Amount which has increased to $10,880 in 2021 from $10,783 in 2020.
2021 Provincial Tax Rates
|Taxable Income 2021 Tax Brackets||Ontario Tax Rate|
|On the first $45,142||5.05%|
|Over $45,142 up to $90,287||9.15%|
|Over $90,287 up to $150,000||11.16%|
|Over $150,000 up to $220,000||12.16%|
You will see exactly how much tax you pay on your payslip each time you’re paid. You may also see insurance and pension contributions. If you’ve overpaid tax on these then you can claim this back on your tax return. You can apply with our tax partner Taxback.com to get a free estimate of any refunds due.
What documents do I need to have when I start my new job in Canada?
When you start working in Canada for the first time, you’ll need to fill in a few forms. You will also need a SIN (Social Insurance Number). If you don’t have this you might get taxed at a higher rate.
What are TD1 forms?
A TD1 is a federal or provincial personal tax credit form used to determine how much tax you should pay on your income. You will need to fill out federal and provincial TD1 forms when you start working in Canada.
It’s important to remember that if you earned more than 10% of your income outside Canada, you can’t claim the personal tax credits on the forms. So, if you earn more than 10% of your income outside of Canada you should enter 0 in box 13 on your TD1 form.
If you claim personal tax credits you’re not entitled to, you may end up with an underpayment of tax and will need to repay this to the Canada Revenue Agency (CRA).
Forms for 2021
What is a T4 and where can I get it?
A T4 or Statement of Remuneration Paid is a document which shows how much you were paid and how much tax was deducted during the tax year. This information can be used to file your tax return and find out if you overpaid tax.
You’ll normally receive your T4 from your employer by February following a tax year. If you lose your T4 or didn’t receive one, contact your employer directly. Alternatively, Taxback.com can help you to track down missing tax documents including your T4.
Want to claim a tax refund?
Can I claim any expenses?
You might be able to claim certain expenses if you earned over the tax-free threshold.
Examples of eligible expenses include:
- Medical (for example – visit to the doctor, prescriptions, and surgery)
- Travel Expenses
- Tuition fees
- Union dues
- Business (for example – rent, supplies, travel, and professional fees)
You will need proper documentation for each cost in order to claim an expense. So keep any receipts you have!
Can I get a tax refund from Canada?
You may be due a refund if you overpaid tax during the year. In order to reclaim this, you must file a tax return at the end of the tax year. The quickest way to find out if you’re due tax back is by using Taxback.com for a free refund estimate.
How much you can claim depends on a number of factors, including:
- Your residency status
- How long you worked
- How many jobs you had
- The income you received from overseas
- How much tax you paid
- If a tax treaty is applicable
How do I file a tax return for Canada?
You can file your tax return directly yourself with the tax authorities but if you prefer to do it the easy way, you can apply with Taxback.com and they will do all the paperwork for you. You will need your T4 and your SIN in order to file your return.
Check out this short video on getting a Canadian tax refund!
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