9/01/2009

Canadian Taxes - Where Does Your Money Go?

JD over at Get Rich Slowly posted an article  today about the United States of America's taxes.  I thought I would dig up a little information on Canadian Taxes.

For the fiscal year (2007-2008), Canada's federal government recorded $242.4 billion in taxes and other revenues.  The largest expenditure of that money, is DEBT!  Debt costs our country $33.3 billion dollars, annually.  That's about 14 cents of each tax dollar!  The Department of Finance Canada, actually as a pretty great interactive website that explains where all the money went.  Here's a link!

That link tells us a great story about our federal taxes, but I'm curious about our provincial taxes and our sales tax as well.

I will use my salary as an example of how taxed we, as Canadians, are.  I am currently living in the province of Alberta, and will use their guidelines for provincial calculations.  To make it easier, I will base my calculations on the assumption that I have no RRSP's or other means to reduce my taxable income (which I do)

I have calculated the provincial and federal taxes I will owe on my income based on the rates provided by the Canada Revenue Agency.  Those rates are listed here.

The goods and service tax (GST) is a tax that applies to the supply of most goods and services.  In Alberta, we are charged 5% on top of just about everything we buy.  Assuming that I spend approximately $1,500/month on variable (taxable) consumption.  That would be  $75/month or $900/year spent in GST.

Here's a little graph:

Wow!  Talk about a HUuuuge argument to do as much as you possible can to reduce your taxable income!  Just about $12, 500 of my annual salary is gobbled up by taxes, and that's with fairly conservative estimates!

So how can we reduce our taxable income, so that we pay less taxes?

  1. Contribute to RRSPs!!  Keep in mind, this is only a tax deferring vehicle.  You will pay taxes on this money when you take it out after you retire, although in theory at a lower tax rate.
  2. Open a TFSA.  Tax free savings accounts are fantastic vehicles for your emergency fund.  Keep in mind that you don't pay taxes on the INTEREST earned.  You do pay taxes on the money deposited each year.
  3. Have you been going to school?  There are a great number of deductions available for post-secondary students
  4. Do you own a small business?  Look into the ways to reduce your taxable income using business 'write offs'
  5. If you already donate to charity, keep and track those receipts, and claim it!
There are so many different ways, however; each person has their own unique set of circumstances.
How do you reduce your taxable income?  Do you think you pay too much, or too little in taxes?

I will be credit card debt free in 3 days!!
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2 comments:

  1. Great post, Jessie!

    And to think in BC they are bringing in an HST of 12%! :( *pout* (Which I know some provinces are already dealing with.)

    ReplyDelete
  2. Thanks for the link- it was pretty interesting.
    To answer your question- I'm in BC and I'm pretty happy with how much I pay in tax and what I get in return.
    I'm not concerned about the HST either- it really won't affect many of my purchases other than eating out and hair cuts!
    Another interesting link I came across awhile back is "Canada's quiet bargain" report; http://www.growinggap.ca/campaigns/public_spending

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