Note:Visual tax summary is a feature that’s only available to users of one of our paid products. If you decide to upgrade, not only will you have access to a ton of great features, you’ll also get a visual breakdown of the amounts found in your return that relate to the each of the sections below. This’ll let you see exactly how they all work together to get your refund or tax owing.
What's total income?
Your total income is calculated by combining all your sources of income, including what you earned from employment or self-employment activities, from your investments (in the form of dividends or interest), foreign income, etc. It even includes the income you earned that wasn’t reported on any of your slips, like tips and gratuities.
Note: If you earned employment income while working for a company that’s located outside of Québec (regardless as to whether or not you performed your duties in Québec or abroad), this income is also included when calculating your total income.
Determining your total income is important because it's the first step in figuring out if you're taxable or not. Once you know your total income, you can then apply certain deductions to reduce your total income to your net income (this amount is used to calculate certain benefits like the GST/HST tax credit, Canada child benefit, or the Guaranteed Income Supplement).
Refer to the list below for some of the more common income sources you’re likely to include in your return. For a full list, refer to the Revenu Québec’s Revenu Québec’s Income Tax Return 2016 Guide.
- Employment income
- Parental insurance benefits
- Québec pension plan (QPP) or Canada pension plan (CPP) benefits
- Other employment income
- Old age security (OAS) pension
- Interest and other investment income
- Rental income
- Taxable capital gains
- RRSP income
- Self-employment income
- Social assistance payments
What are deductions?
Before you can calculate your taxable income, you must first claim any deductions that apply to you. Some deductions help by lowering the amount of income you’re required to pay taxes on, while others will directly lower your tax liability.
Some deductions are allowed by the government because they encourage beneficial behaviours like making contributions to your RRSP, or splitting pension income with your spouse*; others are designed to help you manage the costs of daily life (the cost of childcare and, in some cases, your work-related expenses can be deducted from your total income).
*It’s important to remember that while splitting pension income with your spouse results in a deduction that you can claim on your return (lowering your total income), the income that’s transferred to your spouse will increase his or her total income.
Refer to the list below for some of the more common deductions you’re likely to claim on your return. For a full list, refer to Revenu Québec’s Income Tax Return 2016 Guide.
- Childcare expenses
- Moving expenses
- Carrying charges and interest expenses
- Deduction for residents of a designated remote area
- Disability supports deduction
- Social benefits repayment
What's taxable income?
In the simplest of terms, your taxable income is calculated by subtracting all your deductions from your total income.
Your taxable income is then used to figure out the amount of Québec tax you owe before your refundable and non-refundable tax credits are claimed.
What are non-refundable tax credits?
Much in the same way federal non-refundable tax credits reduces your federal tax owing, Québec’s non-refundable tax credits lowers the amount of taxes you’re required to pay to government of Québec.
Generally speaking, if the total of these credits is more than the Québec tax that you owe, you won’t receive the difference back as a refund. You will however receive a refund if the amount of taxes you’ve already paid (or the taxes paid by your employer on your behalf) to the government is more than what you owe once these credits have been applied.
For example, let’s say your total provincial non-refundable tax credits for 2016 is an even $1,000. If, while completing your return your provincial tax owing is calculated to be $750, the best your provincial non-refundable credits can do is reduce this amount to $0.
If however your taxes withheld at source (for example, by your employer) equals $750, applying these credits to your return might actually reduce your tax owing to a point where you’ve paid too much tax during the year. If that’s the case, you’ll receive the difference as a tax refund.
Refer to the list below for some of the more common non-refundable credits you’re likely to claim on your return. For a full list, refer to Revenu Québec’s website.
- Basic personal amount
- Expenses for medical services not provided in your area
- Interest paid on student loans
- Tax credit for tuition or examination fees
Once all of the non-refundable credits that apply to you have been subtracted from your income, a specific Québec tax rate is applied to the different tiers of your income; the amount you’re left with is your Québec tax.
What is income tax on taxable income?
As you might expect, this is the amount of tax you need to pay on your taxable income – but how did we get here? First, your taxable income is calculated by subtracting your deductions and non-refundable tax credits from your total income. Once that’s done, tax rates that are specific to residents of Québec are applied to the different tiers of your income; the amount you’re left with is your Québec tax payable.
For example, let’s say your taxable income for the year is $65,000. The way Québec’s tax brackets are designed, a tax rate of 16% is applied to the first $42,390 of your income while a slightly higher rate of 20% is applied to the remaining $22,610. This means that your provincial tax owing for the year would be $11,304:
$42,390 x 16% = $6,782
$22,610 x 20% = $4,522
Income tax and contributions
From your tax owing there are certain credits that can be subtracted and certain contributions that are added to reach your total income and contributions (Line 450 of Quebec TP-1). Some of the credits that help reduce your amount owing include:
- Québec political contributions
- Dividend tax credit
- Tax credit for the acquisition of Capital régional et coopératif Desjardins shares
- Tax credit for a labour-sponsored fund and
- Credits transferred from one spouse to the other
Conversely, certain contributions that you’ve made during the year will increase the amount owing. The amounts include:
- Additional contribution for subsidized educational childcare
- Annual registration fee for the enterprise register
- QPIP premium on income from self-employment or employment outside Québec
- Advance payments of tax credits
- Special taxes
- QPP contribution on income from self-employment
- Contribution to the health services fund
- Premium payable under the Québec prescription drug insurance plan and
- Health contributions
Note: If you’ve claiming any of the following amounts, you can choose to reduce the amount you’re claiming instead of transferring the unused amount to your spouse so that you can use them on a future return:
• Medical expenses
• Interest paid on a student loan
• Tax credits for donations and gifts
• Tax credit for tuition and examination fees
• Foreign tax credit
• Tax credit for a labour-sponsored fund
Income tax and other credits
The income tax you’ve already paid (like the Québec income tax withheld by your employer) along with amounts that you might have overpaid during the year like QPP or CPP contributions are reported here, with your other refundable credits to lower your total tax payable.
Refer to the list below of some of the more common refundable credits you’re likely to claim on your return. For a complete list, refer to Revenu Québec’s website.
- Tax credit for childcare expenses
- Tax credit for caregivers
- Tax credit for children’s activities
- Solidarity tax credit
- Refundable tax credit for medical expenses
What are spousal refund transfers?
Did you know that Revenu Québec allows you to transfer part or all of your refund to your spouse to help reduce their tax owing? Before you transfer any of your refund to your spouse, there are just a couple of things that you should know:
- The amount you transfer can’t be more than what your spouse owes to Revenu Québec (to be sure, check the amount found on line 475 of his or her Québec return)
- Once you’ve made the transfer, you won’t be able to cancel or change the amount being transferred
- Even if you’ve only transferred a portion of your refund to your spouse, you won’t be able to request an accelerated refund on the remaining refund amount
- Before Revenu Québec transfers a portion of your refund to your spouse, they reserve the right to use all or part of your refund to pay any debt you owe to the government (for details refer to Revenu Québec’s website)
Unfortunately, if your spouse passed away in 2016, you won’t have the option to transfer a portion of your refund to cover a balance due for the 2016 tax year.
