Personal Income Tax — Educator fact sheet
Tax literacy and financial management
As an educator, you can play a key role in helping your students become tax literate.
Understanding our tax responsibilities is an important part of financial management.
When creating a budget, we need to be aware of the taxes that may be deducted off our pay cheque, as well as available tax credits and benefits that may help us pay for living expenses.
Key concepts
We may not get to keep all the money that we earn.
- Income is the money we earn inside and outside Canada and includes full and part-time wages, tips and from selling goods or services online.
- Personal income tax:
- is a tax we may have to pay on our income
- is usually deducted off our paycheque by our employer and sent to the Canada Revenue Agency (CRA)
- must be accounted for when creating a personal budget.
Discussion prompts
- Discuss different types of taxes and why we may pay them.
- Discuss different types of income we may have to pay tax on, as well as income we may not have to pay tax on.
- Review a pay cheque with your students. Discuss the different deductions, including personal income tax, Employment insurance (EI) and Canada Pension Plan (CPP). Watch CRA’s Learn about your taxes – What’s on your pay stub video.
We need to file an Income Tax and Benefit Return each year we have income.
- Ontario’s personal income tax system is based on self-reporting. This means that each year we earn money, we are expected to complete an accurate Income Tax and Benefit Return (tax return) and send it to the CRA by April 30 of the following year. Failing to do so could result in us being charged penalty and interest.
- The tax return is a set of forms used to report our total income for the year, calculate the tax payable and determine if we paid the right amount of tax.
- The tax return allows us to claim various expenses, deductions and credits to reduce or even eliminate our tax payable.
- If we paid a lot of tax, we may get a tax refund.
Discussion prompts
- Discuss different options available to file an Income Tax and Benefit Return.
- At tax filing time, engage your students in the personal income tax filing process. Review resources available to help complete the income tax return.
Even if we do not earn income, filing a tax return can result in government payments to help with our living expenses.
- The tax return acts as an application for tax-free government payments such as the Ontario Trillium Benefit.
- When you file a tax return, you are automatically considered for the federal Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit as well as the Ontario sales tax credit (part of the Trillium Benefit).
- Payments generally start at age 19.
- The only way to receive tax credits and benefit payments is by filing a tax return each year.
Discussion prompts
- Discuss how credits and benefits apply to people at various stages of their life. Use the Canada and Ontario benefit finder tools to see what is available for a 1) student, 2) parent, and 3) senior.
- Remind students about the connection between filing a tax return and receiving most government benefits:
- The tax return is an application form to apply for tax credits and certain benefits.
- The tax return is often used to verify your income when applying for other government benefits and programs.
Online resources and instructional tips
Government credits, benefits and programs change over time. An important component of tax literacy is understanding how to access these credits and benefits. There are many online government resources and tools available to help people.
Encourage students to become familiar with government resources available to support their tax literacy. The Personal Income Tax – Worksheet is a helpful tool to encourage students to demonstrate their knowledge.