Unit 1 – Income Taxes
Lesson 6: Tax Exercise
In the previous five lessons, we have provided some insight as to the ways in which the Income Tax Act plays a role in the finances of all Canadians. We have touched on the history of taxes in Canada, progressive tax brackets, Average Tax Rate and Marginal Tax Rate, and finally the types of Investment Income and how they are taxed. As a means of measuring what you have learned in this Unit, we have put together a few exercises that will allow you to test your knowledge regarding some simple tax examples.
Exercises
- Using the tables below, determine the total federal tax payable for a salary of $186,000 earned in the form of Employment Income. (The Federal Basic Personal Amount has been provided).
2020 Federal Tax Calculation - $186,000 Income |
|||
Earning Bracket |
Tax Rate |
Taxable Earnings This Bracket |
Tax Due |
$0 to $48,535 |
15.00% |
X $ |
= $ |
+ $48,535.01 to $97,069 |
20.50% |
X $ |
= $ |
+ $97,069.01 to $150,743 |
26.00% |
X $ |
= $ |
+ $150,743.01 to $214,368 |
29.00% |
X $ |
= $ |
+ all income over $214,368 |
33.00% |
X $ |
= $ |
= Sub Total Tax Due |
$186,000 |
= $ |
|
- Personal Amount 2020 ($13,229) |
15.00% |
X $ |
= $1,984.35 |
= Federal Tax Due 2020 |
= $ |
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- Using the table below, determine the total British Columbian provincial tax payable for the same salary of $186,000, all earned in BC in the form of Employment Income. (The BC Provincial Basic Personal Amount has been provided).
2020 British Columbia Provincial Tax Calculation - $186,000 Income |
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Earning Bracket |
Tax Rate |
Taxable Earnings This Bracket |
Tax Due |
$0 to $41,725 |
5.06% |
X $ |
= $ |
+ $41,725.01 to $83,451 |
7.70% |
X $ |
= $ |
+ $83,451.01 to $95,812 |
10.50% |
X $ |
= $ |
+ $95,812.01 to $116,344 |
12.29% |
X $ |
= $ |
+ $116,344.01 to $125,000 |
14.70% |
X $ |
= $ |
+ $0.00 |
16.80% |
X $ |
= $ |
= Sub Total Tax Due |
$125,000 |
= $ |
|
- Personal Amount 2020 ($10,949) |
5.06% |
X $10,949 |
= $554.02 |
= British Columbia Provincial Tax Due 2020 |
= $ |
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- What is the total tax payable for the individual living in British Columbia and earning $186,000 of Employment Income?
2020 Federal & British Columbia Provincial Tax Calculation - $186,000 |
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|
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|
Gross Taxable Income |
$186,000.00 |
- |
Federal Tax Due |
$ |
- |
British Columbia Provincial Tax Due |
$ |
= |
After-tax, Take Home Pay for 2020 |
$ |
- Using the amounts you have calculated in the first three exercises, determine the Average Tax Rate for this individual.
- Referring to the two tables included below, determine the Marginal Tax Rate for this individual.
Federal Tax Rates for 2020 |
15.00% on the first $48,535 of taxable income + |
20.50% from $48,535.01 to $97,069 of taxable income + |
26.00% from $97,069.01 to $150,473 of taxable income + |
29.00% from $150,473.01 to $214,368 of taxable income + |
33.00% of all taxable income over $214,368 |
*Reference: CRA – www.canada.ca
BC Provincial Tax Rates for 2020 |
5.06% on the first $41,725 of taxable income + |
7.70% from $41,725.01 to $83,451 of taxable income + |
10.50% from $83,451.01 to $95,812 of taxable income + |
12.29% from $95,812.01 to $116,344 of taxable income + |
14.70% from $116,344.01 to $157,748 of taxable income + |
16.80% of all taxable income over $157,748 |
*Reference: Government of BC – www2.gov.bc.ca
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