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Is the tax calculation below for a hypothetical Canadian resident living in Ontario correct?

Gross income - CAD 100K
Foreign capital gains - USD 20K
Dividends - USD 2K

Assume 18% (CAD 18000) is contributed to an RRSP.

According to
Federal tax rates for 2020
15% on the first $48,535 of taxable income, plus.
20.5% on the next $48,534 of taxable income (on the portion of taxable income over 48,535 up to $97,069), plus.
26% on the next $53,404 of taxable income (on the portion of taxable income over $97,069 up to $150,473), plus.

Federal tax on gross income = 0.15 * 48535 + .205 * (82000 - 48534) = 14141

Federal tax credit = 12069 * .15 = 1810

Net federal tax = 12331

Ontario
5.05% on the first $44,740 of taxable income, +
9.15% on the next $44,742, +
11.16% on the next $60,518, +
12.16% on the next $70,000, +
13.16 % on the amount over $220,000

Provincial tax on gross income = 0.0505 * 44780 + 0.0915 * (82000 - 44742) = 5670

So total tax is at least 18001 CAD.

I am not sure how foreign capital gains and dividends are taxed. Can someone help in this regard? Also, is there no standard deduction or pre-tax deductions to retirement accounts other than RRSP? What are the limits for the latter? I came across https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-deductions-contributions/canada-pension-plan-cpp/cpp-contribution-rates-maximums-exemptions.html but did not understand how to apply these.

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https://www.taxtips.ca/calculators/canadian-tax/canadian-tax-calculator.htm You can go here to figure most of this out. I input your data and this is what came out.

fed 14,709 prov 7,784

Note the cap gains are taxed at half the actual amount so $20k (from anywhere in the world) counts as $10k in income.

The foreign dividends are just straight income but this calculator doesn't seem to have a foreign tax credit. Assume you already paid 15% or $300 in tax to whatever country the dividends are from, then you will usually deduct $300 from your taxes.

I assumed this was employment income so you will have to pay the CPP for yourself and not the employers portion. I multiplied the USD by 1.33 for CAD.

Not included are;

CPP & enhanced CPP paid on employment income 2,898.00

EI paid on employment income 856.36

Of course you get some benefit from these. CPP is a small retirement pension and also provides for long term disability if you're unable to work anymore. EI is shorter term un-employment insurance if you get laid off or are sick and also provides some parental benefits.

  • Thank you. Did you use the RRSP deduction of 18K? What is CPP? EI? I wanted this income to be assumed as employment income (not self-employment). I don't have any tax document. This is just a hypothetical salary. So I am not sure what to enter in what box. – user2371765 Nov 2 '20 at 15:17
  • There are links for all your questions at the website. You won't learn taxes just from comments here. I uses 18k for the rrsp deduction. CPP is Canada pension plan. EI is employment insurance. If it's regular employment you'll still be paying some CPP – brian Nov 2 '20 at 15:23
  • I based my calculation on official Canadian government sources. I want to understand how your numbers -which are markedly different from mine- were arrived at, and I am not sure whether a tax calculator can help me with that. – user2371765 Nov 2 '20 at 15:29
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    You may have based it on that but you didn't read the 1000+ pages of accompanying regulations. You missed a lot. It's all spelled out line for line in the calculator. – brian Nov 2 '20 at 15:32
  • OK. I might review some of that later; right now, I just want an approximate number. I did not include tax on capital gains. It is 0.5*20000*0.205 = 2050, and tax on dividends is 2000*.055 = 110 . So total tax as per my calculation is 18000+ 2160*1.33 CAD/USD= 20873.8 and as per yours is 21156. There is a CAD 282 difference which is fine. – user2371765 Nov 2 '20 at 15:47

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