How to Calculate Your Tax Refund (or Owe Less Next Year)

You filed your taxes and either got a refund… or a surprise bill. Either way, if you don’t understand why, it’s easy to repeat the same mistakes next year.

Here’s how to figure out what your refund or balance owing really means — and what you can do to keep more of your money moving forward.

Step 1: Understand the Basics of Your Refund

Your refund isn’t a bonus. It’s a correction. It means the government withheld more from your paycheques than necessary.

If you owe taxes, it usually means:

• Not enough tax was deducted

• You had untaxed income (freelance work, investments, CERB, etc.)

• You didn’t claim enough credits or deductions

Either way, the goal isn’t a huge refund — it’s accuracy.

Step 2: Use Your Notice of Assessment (NOA)

After you file, the CRA sends a Notice of Assessment. This document shows:

• Your total income

• Tax paid

• Tax owed

• Available RRSP contribution room

• Any carry-forward credits

Don’t file and forget. Read the NOA. It tells you exactly where you landed and why.

Step 3: Use a Tax Calculator (Before Tax Season)

You don’t need to wait for T4s to plan ahead. Use an online tax calculator (like the one from Wealthsimple or TurboTax Canada) to estimate what you'll owe next year based on current income and deductions.

This helps you:

• Adjust how much tax your employer withholds

• Plan RRSP or deduction strategies

• Avoid a surprise balance next April

Step 4: Check If You’re Claiming the Right Credits

Missing common credits can cost you. Review:

• Basic personal amount – everyone gets this

• Canada Workers Benefit (CWB) – for low-to-moderate income earners

• Medical expenses – for you or a dependent

• RRSP contributions – often the biggest tax-reduction tool

• Tuition credits – can be carried forward or transferred

You don’t need to memorize them all, but you should review what applies to your situation before tax time.

Step 5: Adjust Your Deductions at the Source

If you consistently get large refunds, you’re giving the government an interest-free loan.

You can request your employer to deduct less tax from your paycheques by filing Form T1213 with the CRA. For example, if you contribute to an RRSP or support dependents, you can ask to reduce tax withheld throughout the year.

It’s not automatic — you need CRA approval, but once granted, you’ll take home more pay now instead of waiting for a refund later.

Step 6: Self-Employed? Pay Attention to Installments

If you earn income without tax withheld (freelance, gig work, rental income), and you owed more than $3,000 last year, CRA might require you to make quarterly installment payments.

Ignoring those letters can lead to penalties and interest. If this applies to you, set reminders and budget for those payments.

Don’t Just File and Forget

Treat tax season like a feedback loop. Every year gives you more information to adjust for next time. Whether you want a bigger refund or want to avoid owing again, you can’t fix what you don’t understand.

So read the Notice of Assessment. Run the numbers. Make changes while there’s still time — not when the deadline is already behind you.