Calculating Federal Tax Refund or Balance Owing
Through this simplified process, you can understand whether you'll receive a federal tax refund or have a balance owing to the CRA. Always consult the most current tax guides, use accurate calculations, and consider seeking advice from tax professionals for precise filing.
1. Calculating Total Federal Tax:
First, you need to compute your total federal tax owed. Start by determining your total income and subtracting allowable deductions to arrive at your taxable income. This taxable income is subject to progressive federal tax rates, resulting in your total tax on federal income (Part A of Step 5 in the T1 Tax Return).
2. Applying Non-Refundable Tax Credits:
Next, apply non-refundable tax credits (Part B of Step 5). These credits directly reduce the amount of tax you owe. Sum up all eligible non-refundable tax credits and subtract this total from the total federal tax calculated in step 1.
3. Refund or Balance Owing:
The difference between your total federal tax and the total non-refundable credits gives you the Net Federal Tax. If the CRA withheld more taxes than your Net Federal Tax over the tax year (through your employer, for example), you'll receive a tax refund for the difference. If less was withheld, you'll owe the remaining balance.