It’s smart to file an income tax return in Canada if you arrived in 2024. If you became a permanent resident and lived in Canada, even for a short period, filing your first income tax return with the Canada Revenue Agency (CRA) can provide financial benefits. If you didn’t earn income in Canada in 2024, filing a return allows you to apply for important benefits like the Goods and Services Tax (GST) Credit, and Harmonized Sales Tax (HST) Credit, or Canada Child Benefit (CCB) you may be eligible for without you filing a tax return. In other words, you will have to file an income tax return if you:

• Want to get benefits and credit payments

• Want to claim a refund

• Have to pay taxes in Canada. 

While filing taxes in Canada for the first time may seem overwhelming, there are resources to help you (see the section below: Government of Canada Income Tax Resources). Many settlement agencies can help you complete your taxes for the first time. This is just one of many important services that settlement agencies provide.

As we approach the “tax season” in Canada and the deadline to file your income tax return, this information will help you get started.

Understanding Canada’s Tax System  

Navigating the Canadian tax system will make your life here much easier. If you’re already employed, you know that a good portion of your earnings goes to taxes, maybe more than what you were used to in your native country. 

The taxes you pay come back to you through helpful public services and many gratuities making Canada one of the most sought-after destinations for immigrants. In addition, you can recover part of your taxes and access tax credits when you file an income tax return each year.

What are Tax Credits?

Tax credits are sums that are deducted from the total taxes you owe. You may be eligible for one or more tax credits. When you claim deductions, you may receive a larger refund or reduce the taxes that you owe. Here are some tax credits and deductions that you may be eligible for:

• Child care expenses deduction

• Canada caregiver credit

• Education and textbook tax credits

• Disability tax credit

• Canada Carbon Rebate is available to residents of Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, and Saskatchewan to offset the cost of federal pollution pricing. Currently, this credit is unavailable in British Columbia, Northwest Territories, Nunavut, Quebec, or Yukon.

When you claim certain tax credits, you must support your claim with receipts.

What Benefits Can I Receive?

When you file your income tax return, you can apply for benefits. These benefits are payments for specific expenses that can help make living in Canada more affordable. Some examples of benefits include:

• Goods and Service Tax (GST) and Harmonized Sales Tax (HST) credit: helps individuals and families with low or modest incomes to offset sales tax.

• Canada child tax benefit: a tax-free payment that helps families with the cost of raising children under 18.

• Provincial & territorial benefits & credits.

Here are some benefits you may be eligible for:

When is the Deadline to File an Income Tax Return for 2025?

The deadline to file your 2024 income tax return in Canada is on or before Wednesday, April 30, 2025. If you owe taxes, you must pay the full amount on or before April 30, 2025. If you are self-employed, the deadline to file your income tax return is June 15, 2025. But if you owe taxes, you still have to pay by April 30, 2025.

If you owe money and do not pay by April 30, you will have to pay daily interest on the amount you owe. Penalties and interest can add up so it’s best to pay the full amount to avoid paying late fees.

Important Tax Changes for 2025

Income tax and benefit amounts will change to offset some of the rising living costs. These changes put additional money in your pocket. Some of the important tax changes for 2025 include:

• The dollar limit for the Registered Retirement Savings Plan (RRSP) will increase from $31,560 to 32,490 (with a limit of 18% of your 2023 earned income).

• The dollar limit for the Tax-free Savings Account (TFSA) will remain at $7,000 after two consecutive years of increases. It’s important to use a TFSA as an investment and not as a savings account.

• An increase to the Basic Personal Amount (BPA) you can earn without paying federal tax will range from $14,539 to $16,129 depending on your income.

• Tax bracket changes: all five federal income tax brackets have been adjusted by 2.7% to help Canadians maintain buying power as the cost of goods increases:

How to File Your Income Tax Return

You can file your income tax return for 2024 online in two ways: 

You can also complete your income tax and benefit return by paper. Click here to get a 2024 T1 (personal) income tax package. Be sure to order the package for the province that you reside because the tax system can vary by province.

Use Free Certified Online Tax Software to Simplify the Process:

Here are some free tax software products that you can use. These are great if you have a simple tax return to file:  

Find Free Tax Clinics:

You may be eligible to use the Community Volunteer Income Tax Program if you have a modest income and a simple tax situation.

Avoid Fraud and Income Tax Scams

Unfortunately, scammers try to get Canadians to pay debts they do not owe. And tax season is a prime time for scammers. Newcomers can be vulnerable to these scams, especially when it comes to receiving a call or letter from a government agency demanding money for payment. However, you can protect yourself if you know when and how the CRA may contact you.

Click here to learn about scam protection and the CRA to protect yourself from fraud. This information will help you to respond if you get an email, phone call, letter, or text from the CRA that seems suspicious. 

Government of Canada Income Tax Resources

Learn How to File Your Income Tax Return

Canada Revenue Agency provides online learning resources to help you learn about personal income taxes in Canada. The Learn about your taxes course consists of seven online learning modules:

• One: Purpose of taxes
• Two: Starting to work (why you need a social insurance number, what’s on your pay stub and T4 slip)

• Three: Preparing to do your taxes (what to know before you do your taxes, different ways to do them)

• Four: Completing a basic tax return (an introduction to a basic income tax and benefit return)

• Five: After completing a tax return (understanding a notice of assessment, paying off a balance, working with the CRA)

• Six: Using My Account (how to use CRAs online portal)

• Seven: Accessing your benefits and credits.

In summary, if you arrived in 2024 and lived in Canada even for a short period, it’s smart to file your first income tax return. And with the deadline approaching on April 30, 2025, there is still time to file your income tax return. This will allow you to claim deductions and apply for future tax benefits that will put money in your pocket!

Pay deductions can often be confusing and can come as an unpleasant surprise if you weren’t expecting them. Canadian workers have quite a few pay deductions that you should be aware of. Some of these are mandatory, like taxes, while others are voluntary, like union dues. These deductions make the difference between net pay and gross pay. Many pay deductions are there to help you in the future. However, you won’t be able to take advantage of the extra money if you do not know where it is and how you can access it.

Getting Your First Job in Canada

After you accept a job in Canada, you will receive a job offer letter. This is an exciting time! Your offer letter, also known as an employment letter, will include:

• Annual pay

• Method of payment and how often you will be paid

• Work schedule

• Job description and duties

• Workplace rules and policies

• Other employment conditions such as benefits and commissions.

The amount of money that is shown in the letter will not be the same amount that you will receive. This is because the amount on the letter is your gross pay.

Understanding Net Pay and Gross Pay

Understanding the difference between net and gross pay is important to put your money to the best use. Fortunately, net pay and gross pay are quite easy to understand.

Gross pay: the money your employer pays you before mandatory and voluntary deductions.

Net pay: the amount of money you receive after deductions.

Each time your employer pays you, they must deduct a certain amount from your paycheque. The deductions depend on:

• The province you live in (each province has its own income tax rate)

• What type of job

• How much you are paid

• What programs you are part of (pension plans, Unions, etc.)

However, when an employer tells you how much you are going to be paid they are talking about gross pay. Gross pay is your pay before deductions. It is not actually what you are going to receive. Your gross pay includes bonuses, commissions, and overtime pay.

From your gross pay, your employer will deduct the following:

• Taxes

• Canada Pension Plan (CPP) and

• Employment Insurance (EI).

These deductions are not lost, however. Taxes pay for many public and social services in Canada. CPP and EI will also benefit you in the future when you retire or if you lose your job.

After all the deductions, the remaining money is your net pay. This is the amount you will take home. Avoid confusing your gross and net pay because you need to budget your net pay, not your gross pay.

Your pay stub, or the letter you will receive with every pay, will have your gross and net pay. Your gross pay is listed at the top of the pay stub, followed by any deductions. At the bottom, you will find your net pay. This is the amount of money you will receive for that payment term.

Now let’s look at different pay deductions and how they affect your pay.

Voluntary Pay Deductions, Net Pay, and Gross Pay

Your employer must deduct any voluntary pay deductions before they deduct any income tax. These deductions will affect your net pay. Some examples of voluntary deductions include:

• Union dues

• Uniforms, Meals, Equipment (anything you buy from your workplace)

• Automated deposits that you set up with your bank.

Not every paycheque will have these deductions because you will choose whether or not you want them. Whenever you buy anything from your workplace, you will either have to pay on the spot or the amount will be deducted from your pay. If you are part of a trade union, your union dues will also be deducted from your paycheque.

Any automated deposits you arrange will also be deducted from your paycheque. These deposits may be linked to your savings account or automatic contributions to a Registered Retirement Savings Plan (RRSP).

Depending on your job, you could also have other deductions as well. Review your pay stub each month to ensure the deductions are correct. If you see a deduction you don’t recognize, talk to your employer about it. Keep in mind this money is not taxable income. You pay taxes based on the income after deductions.

Mandatory Pay Deductions from Your Gross Pay

Income Tax

Once all the voluntary pay deductions have been made the remaining money is taxable income. The government will take some of your taxable income as income tax. Income tax goes to both the provincial government and the federal government. The government uses this money to invest in education, healthcare, and infrastructure.

Employment Insurance (EI)

Another deduction that is made from your taxable income is EI. As the name suggests, employment insurance provides financial support in case you lose your job. EI provides a temporary income to workers while they are forced to leave their jobs due to illness, need to care for family, or upgrading skills. Click here to learn more about Employment Insurance.

Canada Pension Plan (CPP)

Another mandatory pay deduction is CPP. This deduction ensures that you have some financial support after you retire. CPP functions to replace some of your current income when you retire. Of course, the more CPP you contribute, the higher your pension will be when you retire.

Another way to increase your pension after retirement is to work longer. The earlier you retire, the less pension you will receive each month. So to receive more, you can retire later. The standard age of retirement is 65. However, you can retire as soon as 60 and as late as 70.

To learn more about CPP, click here.

Payroll Deductions Can Provide Financial Security

As you can see, many payroll deductions help you save for the future. However, you can take things further by adding more deductions to your pay, each payment term. I know it’s tempting to want all your money from each paycheque but it’s wise to save for the future.

A good way to save for the future is to set up automated deposits into your savings account or a Registered Retirement Savings Plan (RRSP). These automatic deposits contribute a portion of your paycheck into whatever account you want them to.

Saving for Your Future in Canada

You can refer to the 50/30/20 budgeting rule if you’re unsure how to budget your money. The rule recommends you put at least 20% of your pay toward savings. This way, you will have most of your pay for fixed expenses and entertainment while building savings over time.

If you plan to pay for your child’s post-secondary education, you can also open a Registered Education Savings Plan (RESP). An RESP is a great way to save for post-secondary education because the government will also contribute money to your RESP for every dollar you contribute. You can set up another automated deposit for this.

The best financial advice is to stick to a budget and automated pay deductions are no exception. Divide your money properly and have enough to pay for basic expenses before you set up any automated deposits. However, it may be wiser to make manual deposits if your income is not reliable or low.