How do you calculate your instalment payments?
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How do you calculate your instalment payments?
On this page
- What are your instalment payments based on?
- Calculation options
- Instalment reminder received in August 2017
- You want to reduce or eliminate the amount of your instalment payments
What are your instalment payments based on?
Instalment payments are calculated based on all of the following:
- your net tax owing
- any Canada Pension Plan (CPP) contributions payable on self-employment and other earnings
- any voluntary employment insurance (EI) premiums payable on self-employment and other eligible earnings
Net tax owing – Generally, this is the amount you owe on your tax return. The items used to calculate net tax owing (line 15) are listed in the Calculation chart for instalment payments for 2017.
Calculation options
You have three options to choose from to calculate your instalment payments:
No-calculation option
This option is best for you if your income, deductions, and credits stay about the same from year to year.
We will give the no-calculation option amount on the instalment reminders that we will send you. We determine the amount of your instalment payments based on the information in your latest assessed tax return.
Prior-year option
This option is best for you if your 2017 income, deductions, and credits will be similar to your 2016 amount but significantly different from those in 2015.
You determine the amount of your instalment payments based on the information from your tax return for the 2016 tax year. Use the Calculation chart for instalment payments for 2017 to help you calculate your total instalment amount due.
If you use the prior-year option and make the payments in full by their 2017 due dates, we will not charge instalment interest or a penalty unless the total instalment amount due you have calculated is too low. For more information, see Instalment interest and penalty charges.
Current-year option
This option is best for you if your 2017 income, deductions, and credits will be significantly different from those in 2016 and 2015.
You determine the amount of your instalment payments based on your estimated current-year (2017) net tax owing, any CPP contributions payable, and any voluntary EI premiums. Use the Calculation chart for instalment payments for 2017 to help you calculate your total instalment amount due.
If you use the current-year option and make the payments in full by their 2017 due dates, we will not charge instalment interest or a penalty unless the amounts you estimated when calculating your total instalment amount due were too low. For more information, see Instalment interest and penalty charges.
Tip
By choosing the best option for you, you will not overpay your tax during the year or have a large amount of tax to pay when you file your tax return. You do not have to tell us which option you choose.
Instalment reminder received in August 2017
If you only received an instalment reminder in August and the reminder does not mention a March or June 2017 instalment payment, follow the instructions that apply to you:
No-calculation option – Pay the amount shown in box 2 of your reminder for September 15 and December 15.
Prior-year option – Calculate your 2016 net tax owing and add any CPP contributions payable, and any voluntary EI premiums payable. Pay 75% of the total on September 15 and 25% on December 15.
Current-year option – Estimate your current-year 2017 net tax owing and add any CPP contributions payable, and any voluntary EI premiums payable. Pay 75% of the total on September 15 and 25% on December 15.
You want to reduce or eliminate the amount of your instalment payments
You can reduce or eliminate the amount of your instalment payments if you reduce your net tax owing. You can do this by having tax withheld, or by increasing the amount of tax withheld, from the following types of income:
- Old age security or Canada Pension Plan benefits – Send Form ISP3520, Request for Income Tax Deductions, to your Service Canada office
- Quebec Pension Plan benefits – Visit Retraite Québec
- Employment income or pension benefits from an employer-sponsored pension plan – Provide Form TD1, 2017 Personal Tax Credits Return, to your employer or pension plan administrator
Income tax cannot be withheld from certain types of income, such as self-employment, investment, and rental income, and capital gains.
Example – How to eliminate the amount of your instalment payments
Hugh, a resident of Alberta, pays his tax by instalments. He decides to have more tax withheld from his income in 2017. His net tax owing has been $3,500 for several years, and he expects it will stay the same in 2017. In January 2017, Hugh gave his pension plan administrator a filled out Form TD1 that stated he wants an extra $250 withheld each month from his pension income.
Hugh now estimates his net tax owing will be $500 for 2017. Based on his estimate, he does not have to make instalment payments in 2017 because his net tax owing will not be over $3,000 for 2017. Hugh would disregard the instalment reminders he gets for 2017.
- Date modified:
- 2017-01-03