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CRA stands for what?
Canada Revenue Agency
Tax brackets are the same across the country.
False. Federal tax brackets are the same, but provincial/territorial brackets vary.
T4
When is capital gains tax charged and collected?
When the asset is sold.
List 3 common refundable tax credits.
Child tax benefit
GST/HST tax credit
Working Income Tax Credit
Where are three places that taxable income can come from?
employment, self-employment, pension, government benefits, investments, inheritance, capital gains
When your income puts you in a higher tax bracket, all your income is taxed at the higher rate.
False. Only income that falls within the bracket is taxed at that rate.
What is a tax write-off?
It is when the cost of a business expense is exempt from your taxable income.
Your total tax minus deductions and exemptions is known as this.
Your taxable income
Who pays the income tax on an RESP?
The student upon time of withdrawal.
What kind of taxation structure is defined by different income levels charged taxes at a different rate?
A progressive tax structure.
Bonus!
What kind of tax structure is it when everyone is charged the same rate?
As a tax payer you have the rights and responsibility to:
Pay no more than tax laws have authorized
Fair treatment
Filing tax returns by the deadline
Paying the correct amount of tax
Giving CRA information to assess your return
Getting help when necessary
True.
True or false?
Rental income is treated as employment income for tax purposes.
True.
What is a tax deduction?
An expense that reduces your taxable income.
Which one of the following are NOT tax deductions:
1. Child support payments
2. Half the amount paid to RRSPs
3. Union dues
4. Moving expenses
#2.
What do taxes pay for?
Government services and benefits.
It is your employers responsibility to help you understand what taxes and deductions are taken off your pay.
False. Literally nobody will do this for you. You have to be prepared to check the amount and understand what deductions are legal in your province.
When you are self-employed, the government will keep track of your tax bill and send it to you quarterly.
False.
Eventually the government will send you a fat bill, but you are responsible for keeping track and paying your taxes.
Give 4 examples of expenses that are tax deductable.
RRSP contributions, RESP contributions, RDSP contributions, childcare expenses, self-employment expenses.
What are some restrictions placed on RRSP contributions?
- penalty for withdrawing early
- 18% of income is max contribution or $31,560 cap.
- taxes charged upon withdraw in retirement
Name the three levels of government that you pay taxes to.
Federal, Provincial, Municipal.
Tips, health insurance, bonuses and pension contributions are all taxed as income.
True. Your entire compensation packages is treated as income.
Profits from the sale of property is subject to this kind of tax.
What is capital gains tax.
Charlie makes well into the 33% income tax bracket. He is offered a $10,000 tax credit OR a $10,000 tax deduction.
How much money would he save on his taxes with each option, and which should he choose?
Tax Credit: Save $10,000
Tax Deduction: Save $10,000*0.33 = $3,333
Tax credit better.
Which should you apply to your taxes first, refundable tax credits or non-refundable tax credits?
Why?
Apply non-refundable credits first to bring your bill to zero (if possible). Then claim refundable tax credits so that you will be sent that amount.