Income Tax 101

Understand taxes and benefits and even file your own tax return!

Do you fear numbers and math or filling in forms? Is your filing system shoving official papers into a plastic bag? Regardless, if you are 18 years old or older you need to file a tax return. You want to file even if you have no income so that you receive benefit payments. Even children who work should file a return. Are you prepared to do your 2024 income taxes? Here you will learn how, and which benefits you can claim.

You can also read our previous article and the Canada Revenue Agency (CRA) Get ready to do your taxes webpage.

Filing your income tax return isn’t as scary as you think. | Photo by Edmonton Public Library

Ways to do your taxes

1. If you’ve received a letter from CRA inviting you to use SimpleFile, follow the instructions in the letter.

2. Use NETFILE-certificated tax software (see below for more information).

3. Use a community volunteer tax clinic if you qualify.

4. Work with a tax preparer.

5. Complete a paper return (this is really the hardest and slowest way).

The earliest day to file your 2024 taxes online is February 24, 2025. The deadline to file and pay any taxes owing is April 30.

Filing income tax yourself isn’t as scary as you think! Income tax software is available for you to use on your computer, tablet, or phone — some tax software is free or low cost. You just have to type in your name and address, answer some questions, and then transfer the amounts on your tax slips to the program. Better yet: Use “Auto-fill my return” to avoid having to enter all those numbers in the right boxes manually.

The volunteer tax clinics use the UFile software. UFileFREE is available online for free for students, seniors, people with income below $20,000, or single T4. Other options are TurboTax, Wealthsimple Tax, CloudTax Free, and Studio Tax. You can download their apps if you’re using a mobile device.

Getting your refund - You can check processing times online but it generally takes about two to three weeks to receive your refund when it is sent electronically, and four to six weeks if mailed. Some tax services like H&R Block offer instant refunds if you will be receiving more than $600. It will cost you 15 per cent on the first $300 and 5 per cent on the rest, so $60 of $600.

Make sure you have a CRA direct deposit set up or that CRA has your correct mailing address. It’s best to set up My Account with CRA. It is a bit of a process, but then you can easily access your Notice of Assessment and proof of income statements, update your contact information and much more.

What you need to know about income tax

You pay a percentage of tax on your taxable income. The combined Alberta and Federal personal income tax brackets and tax rates are:

• 25 per cent on the first $55,867

• 30.5 per cent over $55,867 up to $111,733

• 36 per cent over $111,733 up to $148,269

• 38 per cent over $148,269 up to $173,205

• 41.32 per cent over $173,205 up to $177,922

• 42.32 per cent over $177,922 up to $237,230

• 43.32 per cent over $237,230 up to $246,752

• 47 per cent over $246,752 up to $355,845

• 48 per cent over $355,845

Taxable income is your gross income from all sources, minus any tax deductions you qualify for. Some common deductions are RRSP contributions, child care expenses, and union dues. Your tax bracket is progressive meaning taxable income is separated into multiple levels. You pay different percentages of tax on each level of your income.

So if Jane’s income is $65,000 and she puts $5,000 in RRSPs. Then her taxable income would be $60,000. Total tax owing would be:

• $55,867 taxed at 25 per cent = $13,967

• $4,133 taxed at 30.5 per cent = $1,261

• Total tax: $15,228

But wait! The government reduces how much tax you have to pay with a variety of tax credits such as basic personal amount, credit for over 65, children, disability, tuition, medical, employment insurance, Canada Pension Plan, and interest on student loans.

You don’t pay any federal income tax on the first $15,705 or Alberta tax on the first $21,885 of taxable income.

Understanding benefits

If you work for an employer, they already took income tax off your income and sent it to CRA. So why file an income tax return? One reason is because you may have paid too much income tax, and in that case you would get a refund. On the flip side, you could have paid too little and now owe money to the CRA. But for most families, especially those with lower incomes, the most important reason to file a return is to get the benefits you qualify for.

GST rebate - For people at least 19 years old and it is based on family income. You could get up to $519 if single, $680 if married, plus $179 for each child. This total amount will be divided into four and payments will be sent on the 5th of April, July, October, and January.

Canada Carbon Rebate - For people at least 19 years old. You automatically get it after you file your income tax return. It is not affected by your income, but by location (rural residents get a higher rebate), marital status, and number of children. The rebate is paid quarterly on the 15th of April, July, October, and January. A single person will receive $225 each quarter.

Canada Workers Benefit - For people working and earning a low income. The amount depends on your income. Advance payments are made on July 12, Oct 11, and January 10.

Canada Child Benefit - For people primarily responsible for the care of a child under 18 years. Payments from July 2024 to June 2025 are based on our 2023 income tax return. Your 2024 return will be used to calculate payments starting in July 2025.

Alberta Child and Family Benefit - For families that have children under 18 years based on income. Payments are issued in August, November, February, and May. Payments between July 2024 and June 2025 are based on your 2023 income tax return. Your 2024 return will be used to calculate payments starting in July 2025.

Claw backs - The CRA may keep your tax refund, GST and carbon rebates, or parts of other benefits to pay government debts such as income tax or benefit overpayments. If this causes you financial hardship, contact CRA to discuss relief measures.

Karen is a CVITP volunteer tax preparer at the Alberta Avenue Tax Clinic.