Generally, you can earn a personal income of $14,398 for the 2022 taxation year without having to pay taxes in Canada.
This number will increase to $15,000 for the 2023 taxation year.
This is the basic personal amount that can be claimed as a non-refundable tax credit by all individuals.
The basic personal amount tax credit reduces every Canadian’s federal income tax.
This amount varies depending on your income for the year.
Typically, if you earn below the basic personal amount, the tax credit will cancel out your income, and you will not be required to pay any tax.
Because it is non-refundable, any excess of the basic personal amount tax credit over your income for the year will not be paid to you as a refund.
Do I Still Need to File a Tax Return?
Even though you may not be required to file income tax due to your income being below or equal to the basic personal amount tax credit, it may be beneficial to file your return.
The CRA requires you to file a tax return for specific reasons.
Certain benefits apply when you file your income tax and benefit return.
Access to Government Grants and Benefits
You can access government benefits and grants when you file your tax return.
For example, the Canada Child Benefit (CCB) is payable based on your net income, which the Canadian government assesses through your tax return.
Also, to qualify for a Canada Learning Bond (CLB), you will need to file a T1 to confirm that you are eligible based on the adjusted net income requirement.
You can also claim other provincial and territorial government benefits when filing your tax return.
Registered Retirement Savings Plan Contribution Room
You also need to file a tax return to enable the Canada Revenue Agency (CRA) to calculate your contribution room for Registered Retirement Savings Plan (RRSP) contributions.
Your RRSP contribution room is determined as 18% of your earned income that you report when you file your tax return.
Avoid Tax Penalties
Sometimes, you may miss out on some types of income that you need to report to the CRA.
When you file your income tax and benefit return, you can discover certain income you need to report, such as capital gains or investment income.
The income tax return can allow the CRA to assess your tax situation and bring any tax defaults to your attention in time.
Carry Over Tax Credits and Deductions
When you file your tax return, non-refundable tax credits are not paid to you as a refund.
However, refundable tax credits and deductions can be payable to you in the applicable tax year.
Some tax credits or deductions may be applied to a previous year or carried forward to a future year.
An example of this type of tax deduction is the capital gains deduction.
Understanding Tax Credits available to Canadians
The Canadian government allows you to reduce your tax payable by providing tax credits and deductions.
You have to be eligible to claim tax credits and deductions.
You may not be able to claim tax credits or deductions that have been reimbursed to you by an employer if they have not been included as part of your income for the year.
Some common tax credits and deductions are:
Child Care Expenses
You could reduce your income tax if you had to pay for eligible child care because you either had to work, attend school courses, or carry out research activities in the year.
RRSP Contribution Deduction
When you contribute to a Registered Retirement Savings Plan (RRSP) or a Pooled Registered Pension Plan (PRPP), you can reduce your income tax payable through the RRSP deduction claim.
Education Expense Tax Credit
Suppose you attended post-secondary education at a recognized educational institution in Canada or outside of Canada.
In that case, you may be able to claim tax credits on your tuition fees and examinations fees.
Medical Expense Claim
Medical expenses for eligible health reasons can qualify for the medical expense tax claim.
If you or your spouse or common-law partner paid for eligible medical expenses in any 12 months ending in the applicable tax year, then you can claim the medical expense tax credit.
Also, if you did not claim eligible medical expenses in the previous year, you can claim them in the current tax year.
Frequently Asked Questions
- Do you have to pay taxes if you work part-time?
Yes, you have to report your income as a resident of Canada. However, if the income you have received is lower than the basic personal amount tax credit, then you may not have to pay any taxes. Also, if any other tax credit is more than the income you received as a part-time worker, you may not have to pay any tax in the year.
- How much can you make without paying tax 2022?
The maximum basic personal amount for the 2022 taxation year is $14,398. If you make this amount or lower, you will not have to pay personal income tax because the basic personal amount credit reduces your taxable income to zero.