# Canadian tax calculation for a sample income

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

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.

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. Commented Nov 2, 2020 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 Commented Nov 2, 2020 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. Commented Nov 2, 2020 at 15:29
• 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. Commented Nov 2, 2020 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. Commented Nov 2, 2020 at 15:47