Can you believe it’s been 4 years since I had tax expert Gerry Vittoratos on the show? That’s right, he was the guest for episode 44 of the Mo’ Money Podcast, so I think that means he’s one of my OG guests! Well, it’s a new season and new decade, and it’s also tax season so I thought I’d bring him back on the show to talk about taxes.
In case you don’t know Gerry, he really knows his stuff when it comes to taxes. He’s been working for Thomson Reuters for over 10 years as a trainer and tax support resource person. In his capacity as head trainer, Gerry has been providing training sessions to tax professionals all over Canada. He has also made several radio and TV appearances on BNN and Global TV as the UFile tax specialist discussing a multitude of tax topics. He has also served as the main resource person for the tax support department of Thomson Reuters, resolving complex tax issues and questions for tax professionals using the DT Professional Suite.
Lastly, Gerry obtained his Graduate Diploma (Gdip) in Taxation from Sherbrooke University in 2018, and is in the process of obtaining a Masters of Taxation!
Here are some of the things we talked about in this episode.
Tax Brackets, Average Tax Rate & Marginal Tax Rate
We talked at length about tax brackets and how in Canada we have a progressive tax system. That means that you pay different tax rates on different portions of your income. Here’s how that would look for your 2019 taxes:
- 15% on your first $47,630 of taxable income
- 20.5% on your next $47,629 of taxable income (on any taxable income over 47,630 up to $95,259)
- 26% on your next $52,408 of taxable income (on any taxable income over $95,259 up to $147,667)
- 29% on your next $62,704 of taxable income (on any taxable income over 147,667 up to $210,371)
- 33% on your taxable income over $210,371
Your average tax rate is the amount of tax you pay divided by your income.
Average Tax Rate = Total Tax / Total Income
Your marginal tax rate is the amount of tax you would pay on your next dollar of income.
With that said, your average tax rate is what you need to know because it will show you how much money you have to pay the government in taxes.
To help, here’s UFile’s Income Tax Calculator.
Refundable & Non-Refundable Tax Credits
There are a ton of tax credit available that you can take advantage of, but it’s important to know the difference between those that are refundable and those that aren’t. Both are still good, but ultimately refundable tax credits are the best kind because you can a tax refund if you use it. For non-refundable tax credits, they only decrease the amount of tax you owe. In other words, if you owe $300 in taxes and your non-refundable tax credit is for $500, you won’t get $200 refunded to you. Your taxes owed would simply become $0.
For more information, check out the CRA’s page on non-refundable and refundable tax credits.
Tax Credits, Deductions & Business Expenses to Be Aware Of
There are a ton of tax credits you can take advantage of, and when you use a tax software like UFile, it will help you find out which ones you quality for. Otherwise, check out this list of deductions, credits and business expenses by the CRA that you may be able to help reduce how much you pay in taxes.
Taxes on Investment Income
If your investments are in a TFSA and/or RRSP, then you don’t have to pay any taxes on any investment income you earn from interest, dividends or capital gains. But, if your investments are in a taxable (unregistered) account, then you will have to pay taxes. Here’s how that all works:
- For any interest you earn (GICs, savings accounts, bonds…), those amounts are taxed at your marginal tax rate.
- For any Canadian dividends you earn, you may be eligible for the Canadian dividend tax credit which will lower your tax rate on that income.
- For any capital gains you earn (the profit you earn when you sell stocks or equity mutual funds or ETFs), only 50% of those capital gains are taxable. That means you get to keep 50% of that profit and not pay tax on it, and the remainder is taxed at your marginal tax rate.
More Tax Resources
As Gerry mentioned on the podcast, make sure to check out these other tax resources that will help you this tax season. I’ve also included my free tax prep checklist.
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