2017 Income Tax Estimator

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Definitions:

Employment Income

Employment income includes amounts you receive as a salary, wages, commissions, bonuses, tips, gratuities, and honoraria. Employment income is usually shown in box 14 of your T4 slips.

Other Income 

For the purposes of this calculator, Other Income should include income from investments, rental properties, etc. It should include all income other than Employment and Eligible Pension income.

Eligible Pension Income 

Eligible pension income is generally the total of the following amounts received by the pensioner during the calendar year:

  • the taxable part of life annuity payments from a superannuation or pension fund or plan; and
  • if they are received as a result of the death of a spouse or common-law partner, or if the pensioner is 65 years of age or older at the end of the year:
    • annuity and registered retirement income fund (including life income fund) payments; and
    • registered retirement savings plan (RRSP) annuity payments.

For a more detailed list of eligible pension and annuity income, see the charts for line 314, Pension income amount:

Total Income

Total income equals the sum of your Employment Income, Other Income and Eligible Pension Income.

RRSP Contribution

This is the amount you have contributed, or plan to contribute, to your own RRSP or your spouse or common-law partner's RRSP plan. For more information, visit the RRSP Contributions section of our site.

Net Income

Net Income is simply your Total Income less your RRSP Contributions for the tax year.

Estimated Income Tax Payable

The Estimated Income Tax Payable is just that - it is an estimate of the income tax you will be required to pay to the Canada Revenue Agency. The estimate does not take into consideration individual provincial refundable cost of living credits (NWT, NU), low income tax credits (ONT, NS, MB, Federal) and additional Health Premiums (Ont). The calculation does include provincial surtaxes (Ont, PEI, YK). 

Average Income Tax Rate

Your Average Income Tax Rate is estimated by dividing your Estimated Income Tax Payable by your Net Income. It is not your Marginal Income Tax Rate. Your Average Income Tax Rate is particularily useful when designing your retirement plan and estimating what your income tax payable might be in retirement.

RRSP Income Tax Savings (Deferred Taxes)

This number estimates the amount of income tax you can defer by contributing to an RRSP. Most investment professionals refer to this number as your RRSP Income Tax Savings - which is technically incorrect. RRSP contributions simply enable you to defer paying income taxes until some future date.

CPP Premiums

All employees in Canada must contribute a portion of their earnings toward the Canada Pension Plan System. The deductions are made by your employer and reduce your Take Home Pay. When preparing and following a budget, most Canadians do not include CPP Premium deductions in their calculations.

EI Premiums

All employees in Canada must contribute a portion of their earnings toward the Emplyment Insurance System. The deductions are made by your employer and reduce your Take Home Pay. When preparing and following a budget, most Canadians do not include EI Premium deductions in their calculations.

Take Home Pay

Your Take Home Pay is calculated by deducting your RRSP Contributions, Income Tax Payable, CPP Premiums and EI Premiums from your Total Income. Your Take Home Pay is an estimate of the amount of money you have available to pay your living expenses and bills. Many Canadians think their Total Income is what they have to spend each year - not! Your Take Home Pay is actually closer to the true number for budgeting purposes.

 

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