How to determine the amount of taxes owed.

1. You add up all your income (employment income like salary and commission, investment income, savings income). This is your TOTAL INCOME.
2. You reduce that TOTAL INCOME number by taking advantage of any tax deductions available to you - things like union dues, RRSP contributions, and childcare expenses. This tells you your NET INCOME.
3. Sometimes, you can reduce this number even further by taking advantage of a different kind of deduction. For example, if you lost money on an investment last year, you may be able to apply an additional deduction at this stage. This tells you your TAXABLE INCOME.
4. You figure out how much tax you owe using your TAXABLE INCOME and finding your TAX RATE.
5. You apply any TAX CREDITS to the tax owing.
6. This is the amount of money you still have to pay the government in income tax. If the amount is negative, then this is the amount that they owe you!