Vancouver BC area: How to calculate your income tax?
November 4, 2013 9:49 PM Subscribe
BC'ers - how do you calculate the rate of income tax you should be paying? After googling I'm coming across wildly different rates for brackets, as well as terms like 'average rate' and 'marginal rate' (what are these? The internet doesn't want to tell me!) I normally do my own taxes at home (UK) but am being driven round the bend trying to get the figures for this.
I have no idea, but if you're looking for a recommendation to an excellent Vancouver accountant, shoot me a memail. (No relation or anything, and nothing in it for me - just a friend who I happen to know is very good.)
posted by Salamander at 9:58 PM on November 4, 2013 [1 favorite]
posted by Salamander at 9:58 PM on November 4, 2013 [1 favorite]
I've used simpletax.ca to do my own return- if you have your T4 and related forms you can enter them to figure out the rate.
Don't know how it works in the UK, but in Canada income taxes are levied in tiers- everyone pays 15% on the first $40k they make, then 22% on the next $40k, and higher and higher the more you make. The highest tier you are in is the marginal rate.
The average rate is the average across all tiers- if you made $60k it would be 15%*40k + 22%*20k = ~17%.
posted by beepbeepboopboop at 10:34 PM on November 4, 2013 [1 favorite]
Don't know how it works in the UK, but in Canada income taxes are levied in tiers- everyone pays 15% on the first $40k they make, then 22% on the next $40k, and higher and higher the more you make. The highest tier you are in is the marginal rate.
The average rate is the average across all tiers- if you made $60k it would be 15%*40k + 22%*20k = ~17%.
posted by beepbeepboopboop at 10:34 PM on November 4, 2013 [1 favorite]
everydayanewday: "terms like 'average rate' and 'marginal rate' (what are these? The internet doesn't want to tell me!)"
Average rate: tax paid divided by income earned. If you earned 25k and paid 5k in taxes, you paid an average rate of 20 percent. This is good for estimating future tax payments. I guess.
Marginal rate: the rate at which a single additional dollar would be taxed. Ie, the highest rate any of your income was taxed at. This is good for examining changes you might make, i.e. contributing more money dollar to pre-tax savings (rrsp? fuck if I know canada/uk well) or making a large tax advantaged purchase (in the US, a residential mortgage).
Almost invariably, income tax is calculated by a progressive taxation scheme where the more money you make, the higher your income tax rate is. I.e., possibly negative if you're poor, and possibly 38 percent if you're rich in the US and cannot shelter income in any fashion. Aka the brackets. Given the multiple jurisdictions of CA and UK, you probably want a tax professional, although maybe that's just a US'ian perspective.
posted by pwnguin at 12:32 AM on November 5, 2013
Average rate: tax paid divided by income earned. If you earned 25k and paid 5k in taxes, you paid an average rate of 20 percent. This is good for estimating future tax payments. I guess.
Marginal rate: the rate at which a single additional dollar would be taxed. Ie, the highest rate any of your income was taxed at. This is good for examining changes you might make, i.e. contributing more money dollar to pre-tax savings (rrsp? fuck if I know canada/uk well) or making a large tax advantaged purchase (in the US, a residential mortgage).
Almost invariably, income tax is calculated by a progressive taxation scheme where the more money you make, the higher your income tax rate is. I.e., possibly negative if you're poor, and possibly 38 percent if you're rich in the US and cannot shelter income in any fashion. Aka the brackets. Given the multiple jurisdictions of CA and UK, you probably want a tax professional, although maybe that's just a US'ian perspective.
posted by pwnguin at 12:32 AM on November 5, 2013
This little calculator makes it easy: http://simpletax.ca/calculator. Just punch in your annual income and province, and it'll tell you what the yearly income tax is. I've used it with success in the past to estimate my income taxes.
posted by Emanuel at 5:06 AM on November 5, 2013
posted by Emanuel at 5:06 AM on November 5, 2013
I don't know if you've tried this yet, but consider calling the Canada Revenue Agency help line to ask for advice. For a call centre, they are extremely pleasant, knowledgeable, and helpful.
(Not sure what they would do with this question specifically, since depending on your personal situation it could be complex, but I think it would be worth a try and they might at least be able to point you to the best resources. It's also worth noting that their service varies by time of year, and I've only called around tax time (April).)
posted by snorkmaiden at 5:12 AM on November 5, 2013
(Not sure what they would do with this question specifically, since depending on your personal situation it could be complex, but I think it would be worth a try and they might at least be able to point you to the best resources. It's also worth noting that their service varies by time of year, and I've only called around tax time (April).)
posted by snorkmaiden at 5:12 AM on November 5, 2013
Seconding calling the CRA helpline if you have problems. They have answered some outlandish questions of mine in the past with a really quick turnaround time; I've called in February and had no trouble.
What are your sources of income? If you have just one or two that come from traditional employment, it should be quite easy to figure out - it gets more complicated if it's self-employment or weirder stuff.
posted by Lemurrhea at 6:10 AM on November 5, 2013
What are your sources of income? If you have just one or two that come from traditional employment, it should be quite easy to figure out - it gets more complicated if it's self-employment or weirder stuff.
posted by Lemurrhea at 6:10 AM on November 5, 2013
You only have to pay for Turbotax Online when you submit your return, so you can just proceed through the steps to enter all the required data on the Turbotax site and get a very accurate calculation of your tax owing without paying anything. Knowing the marginal rates is not that useful, because there are a number of deductions that most people are eligible for that significantly reduce your effective tax rate.
posted by ssg at 7:38 AM on November 5, 2013
posted by ssg at 7:38 AM on November 5, 2013
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You might also want to complete this short course offered by Revenue Canada: http://www.cra-arc.gc.ca/tx/ndvdls/dctrs/lrn-tx/menu-eng.html
Given that your situation sounds complex (you're a UK citizen but are living/working in BC?), I would strongly suggest either using a program like TurboTax to file, or better yet, hiring a professional to help you.
posted by northernish at 9:53 PM on November 4, 2013 [1 favorite]