Taxes in Toronto

Toronto Working Holiday in Canada

If you go to Canada, you’ll need to pay tax on your income. That is unless you earn under the tax-free threshold of $13,808 in 2021.

Canadian tax rates are progressive, meaning the more you earn (over the tax-free allowance), the more tax you need to pay.

Oh, and as well as federal tax, you’ll need to pay the provincial tax rate for Ontario if you earn more than $10,880.

Tax Rates For 2021

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%
Over $216,511 33%

 

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 $90,288 up to $150,000 11.16%
over $150,000 up to $220,000 12.16%
over $220,000 13.16%

 
The Ontario Basic Personal Amount has also been increased to $10,880 for 2021, which means that you can earn up to this amount without paying provincial tax.

Each time you’re paid you can see how much tax is deducted by looking at your payslip.

What’s a SIN?

Everyone who goes to work in Canada needs a Social Insurance Number (SIN). This is a 9 digit number tax authorities use to identify you. You should apply for your SIN as soon as you arrive in Canada before you start your employment. You can do this by contacting your local Service Canada office.


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Do I need to fill in any tax forms?

You’ll need to complete federal and provincial personal tax credit forms when you start a new job so your employer knows how much tax to withhold from your wages.

A TD1 is a federal, provincial and personal tax credit form that is used to determine how much tax you should pay on your income.

There are a number of times when you may need to complete a TD1 form:

  • when you have a new employer
  • if you want to change tax credit amounts from previous years
  • if you want to claim a deduction for living in a prescribed zone
  • if you want to increase the amount of tax deducted at source

2021 TD1 Forms

TD1 Federal (2021)

TD1 Ontario (2021)

How do I file a Canadian tax return?

Even if you’re on a temporary visa in Canada, such as a working holiday, you’re legally obliged to file a tax return.

The deadline for filing tax returns and paying any balance of tax due is 30 April of the following tax year. The tax return that you file on or before 30 April relates to the previous year’s income.

In other words, a tax return filed on 30 April 2021 must relate to 2020 earnings.

While the deadline to file is 30 April, you can file from around mid-February. It’s always a good idea to file as early as possible and to avoid the deadline rush.

Remember, filing a tax return is the only way to claim a refund of tax.

You can file your tax return directly with the Canadian tax authorities or you can file with a tax expert such as Taxback.com who will handle all of your paperwork and ensure you receive your maximum tax refund.

Your residency status

You should file your tax return under the correct residency status to stay compliant with Canadian tax authorities.

A few factors determine your status, including:

  • residential ties you have in Canada
  • purpose and permanence of your stays abroad
  • your ties abroad

If you’re on a 1 or 2 year Working Holiday Visa and plan on staying for exactly that amount of time before leaving Canada, you should file as a non-resident for tax purposes.

If this is all a bit much and you need help to figure things out, head over to Taxback.com’s 24/7 Live Chat service and a member of their team will be more than happy to answer any tax-related questions you have.


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The 90% rule

Your eligibility for personal tax credits is calculated on the TD1 form, which you will fill out when you start your new job in Canada.

One of the biggest rules you need to consider is the 90% rule. Basically, if 90% of your income was sourced in Canada in the tax year, then you will be entitled to the personal credits. If not, then you shouldn’t claim the credits on the federal and provincial TD1 forms.

To sum up, if more than 10% of your income was earned outside Canada, then you should not claim the credits and instead enter 0 in box 13 on the form.

Remember, as a non-resident you will not be taxed on your worldwide income in Canada. However, the Canada Revenue Agency requires you to declare the amount of income you have earned outside of Canada in order to determine your entitlement to personal tax credits.

What’s a T4?

After the end of the tax year, your employer will issue your T4 (typically in February). This document states your earnings for the previous year and shows how much tax you paid.

The best thing about your T4 is that you can use it to apply for a tax refund.

Am I due a Canadian tax refund?

You may be due to claim a tax refund if you overpaid income tax, Canadian Pension Plan or Employer Insurance.

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

To find out if you’re due tax back, you’ll need to file a tax return in Canada.

By using Taxback.com’s online tax calculator, you can easily get a free estimate of how much your refund will be worth.

Want to claim a tax refund from Canada?


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* Updated On April 27,2021