Alberta Income Tax Guide for New Residents

Last updated on August 16th, 2024 at 03:32 pm

Welcome to Alberta, a province that promises economic opportunities and provides tax advantages to residents. In this Remitly guide, you’ll learn about both the Alberta and Canadian tax systems and explore income tax, tax rates, and some available credits and exemptions. We hope it will serve as a resource as you begin managing your taxes in your new home.

Introduction to Alberta’s Tax System

In Alberta, you’ll pay two main types of taxes: income tax and sales tax. Let’s take a look at each type.

Income tax in Alberta

Income tax is a tax you pay on money you earn through a job, self-employment investments, and other sources. As a resident of Alberta, you’ll file an income tax return once per year for both the federal government of Canada and the provincial government of Alberta.

Sales tax in Alberta

Sales tax is a tax that you pay when you buy goods and services. In Alberta, you’re only responsible for paying a goods and services tax (GST), which was 5% as of 2024.

You will typically pay sales tax when you pay for goods and services. Certain items are generally exempt from GST, including:

• Basic groceries
• Agricultural products
• Most farm livestock
• Most fishery products
• Prescription drugs and drug-dispensing services
• Some medical devices
• Feminine hygiene products
• International transportation services

Key tax considerations when moving to Alberta

If you live in Alberta as of December 31 of a tax-filing year, you’ll pay taxes to the province regardless of how early in the year you moved there. For example, someone who moves to Alberta on January 2, 2023, and someone who relocates there on December 30, 2023, will both file a tax return in Alberta.

Immigrants who are new to Alberta may also owe taxes in their home countries. Consult a knowledgeable tax professional to ensure that you comply with all tax laws in your country of origin.

Understanding Income Tax Rates in Alberta

To file your federal and Alberta taxes, you’ll need to know your income, your tax rate, and what deductions and credits you qualify for. Read on to learn more about each of these three key components.

Calculating income for federal and Alberta provincial taxes

For federal and Alberta tax purposes, your income consists of the following.

Employment income

Employment income is money that you earn for performing work, such as:

• Wages
• Commissions
• Research grants
• Clergy housing allowance
• Foreign employment income
• Royalties
• Self-employment income

Capital gains

Capital gains are profits that you make when you sell something, such as a home or investment, for more than you paid for it initially. In Canada and Alberta, you’ll typically add half of the profit or capital gain to your income for tax purposes. 

Usually, capital gains made through the sale of a primary residence don’t need to be added to your income.

Investment income

Investment income is money you make from investments you still own, usually in the form of dividends and interest. You’ll most likely add 100% of your interest income to your total income. The federal and provincial governments classify dividends in two ways:

• Eligible dividends: With eligible dividends, the company issuing the dividends has already paid higher taxes on the funds. You’ll usually multiply these dividends by 138% when you add them to your income.
• Non-eligible dividends: Non-eligible dividends are taxed at a lower rate at the corporate level. When you add them to your income, you’ll typically multiply these dividends by 115%.

Other income

Depending on your situation, you may have other types of income, including:

• Pension plan income
• Savings plan income
• EI benefit income
• Worker’s compensation
• Social assistance payments
• Rental income

Federal and provincial tax rates

Canada and Alberta have a graduated tax system, meaning that the amount of taxes that you owe increases as your income increases. Here is a look at the federal and provincial tax rates for the 2024 tax year.

When calculating your taxes owed, you’ll move through each tax rate bracket that applies to you. The easiest way to understand this is to look at an example. Say that your income for 2023 was $100,000.

For your federal taxes, you would pay 15% of $55,867. To calculate this, multiply $55,867 by 0.15, which is $8380.05. 

Since your income falls within the second bracket, the remainder of your income would be taxed at 20.5%. First, we need to subtract $55,867 from $100,000, giving you $44,133. 

Now, you multiply that by .205, getting $9047.265. We can round that number up to $9,047.27.

Your total taxes owed to the federal government would be $8,380.05 plus $9,047.27. The total comes out to $17,427.32.

Now, you’ll calculate your Alberta taxes. Under the 2023 tax brackets, you’ll pay 10% on your entire income of $100,000, multiplying 10,000 by .10. This means you owe $10,000 in taxes to Alberta.

When discussing taxes, people often refer to the marginal tax rate. This term refers to the tax rate that you would pay on your next dollar earned. In this example, the federal marginal tax rate is 20.5%, and the provincial marginal tax rate is 10%.

Tax credits and deductions for Alberta

Both the federal and Alberta governments offer tax credits and deductions that help you save money on your taxes. 

A deduction is an amount that you subtract from your income before calculating your taxes owed, while a tax credit gets subtracted from the amount of taxes owed. There are two types of credits:

• Refundable credit: A refundable credit can reduce your taxes owed below zero, triggering a refund.
• Non-refundable credit: A non-refundable credit can reduce your taxes owed only to zero. You won’t receive a refund if the credit takes your taxes owed below zero.

There are many federal and provincial tax deductions and credits. To help you begin exploring them, we’ve provided details about some of the most common ones and a table summarizing them at the end of this section. 

You may be eligible for additional credits and deductions. A knowledgeable tax professional can help you determine which ones apply to your circumstances.

Basic personal amount

The basic personal amount is a non-refundable tax credit that all taxpayers can usually take. 

Both Alberta and the federal government offer basic personal amount credits.

Spousal amount

Available at both the federal and provincial levels, the spousal amount is a non-refundable tax credit for taxpayers whose spouses or common-law partners were financially dependent on them. To claim this credit, your spouse’s net income must be less than your basic personal tax credit amount. 

Canada Child Benefit

The Canada Child Benefit is a program that provides tax-free payments to eligible families with children under 18. You don’t claim this benefit on your taxes. Instead, you apply for it through the Canadian government.

Disability tax credit

Both a non-refundable federal and a provincial credit, the disability tax credit is available to individuals with eligible disabilities.

Dividend tax credit

As a federal non-refundable tax credit, the dividend tax credit helps offset some of the taxes levied against dividends. In 2023, the amount is 15.0198% for eligible dividends and 9.0301% for non-eligible dividends.

Generally, you must have owned the investment from which you received the dividend for 60 out of 120 days to qualify for this credit. Foreign dividends are usually not eligible for the credit.

Canada Workers Benefit

The Canada Workers Benefit is a refundable tax credit available to eligible individuals living in Alberta who earn less than a certain amount. For example, a single person without children who earns $33,093 or less per year may qualify.

To be eligible for the credit, you must have lived in Canada for the entire tax year and be at least 19 years old or under 19 but living with an eligible spouse or common law partner. Full-time students, incarcerated people, and those exempt from Canadian income tax laws can’t receive the credit.

RRSP tax deduction

A federal tax deduction, the RRSP tax deduction is for eligible taxpayers who contributed to a registered retirement savings plan (RRSP) during the tax year.

Alberta Child and Family Benefit

A provincial program, the Alberta Child and Family Benefit provides quarterly tax-free payments to low- and moderate-income Alberta families to cover the costs of supporting children under the age of 18.

You don’t claim the amount on your taxes and don’t need to apply for the program. Instead, you can apply for the Canada Child Benefit. If you’re approved for the federal program and meet Alberta’s eligible requirements, you’ll be automatically enrolled in the Alberta Child and Family Benefit program.

Special considerations for tax filers in Alberta

Self-employed people and recent immigrants have additional considerations when filing federal and Alberta provincial taxes.

Self-employment

If you’re a self-employed person, you’ll need to file additional forms for your taxes. You may also be able to deduct eligible business expenses in some cases. This CRA guide provides detailed information about tax concerns for self-employed individuals.

Immigrants

If you immigrated to Canada this year, the amount you can claim for certain deductions and tax credits may be limited. For more information, check out the official tax guide for newcomers.

How to File Your Alberta Taxes

For the 2023 tax year, the filing deadline for both federal and provincial taxes is April 30, 2024. If you or your spouse or common-law partner is self-employed, you may be eligible for an extension until June 15, 2024. However, any taxes owed will still typically be due on April 30th.

Keep reading to explore how to file your federal and Alberta income tax returns.

Gather required documents

Before you begin working on your federal and provincial tax returns, gather the following documents, as applicable:

• Social Security number
• T4 Statement of Remuneration Paid
• T5 Statement of Investment Income
• T3 Statement of Trust Income Allocations and Designations
• T5008 Statement of Securities Transactions
• T4A Statement of Pension, Retirement, Annuity, and Other Income
• T4A(P) Statement of Canada Pension Plan Benefits
• T4RSP Statement of RRSP Income
• T4RIF Statement of Income from a Registered Retirement Income Fund
• T4E Statement of Employment Insurance and Other Benefits
• T5007 Statement of Benefits–Workers Compensation or Social Assistance benefits
• T2200 Employment expenses
• Last year’s notice of assessment from the CRA, if applicable
• RRSP deduction limit and unused amounts
• Any other income slips or income documentation received
• Payment information for taxes owed
• Bank account information for direct deposit of refunds

You may also need to have receipts and/or payment information for the following on hand:

• Childcare expenses
• Adoption expenses
• Support payments made
• Moving expenses
• Tuition
• Student loan interest amounts
• Charitable donations
• Medical expenses
• Personal attendant/facility care expenses

Complete your tax return online or on paper

Once you have all the necessary information gathered, you’re ready to complete your tax return. Start with Form T1 for your federal tax return, and then move on to Form AB428 for your provincial taxes.

You can fill out your tax forms in a couple of ways:

• Certified tax software: With certified tax software, you answer a series of questions to complete your federal and provincial returns. There are both free and fee-based options.
• Authorized representative: You can designate a family member or tax professional as an authorized representative to complete your returns on your behalf.
• Tax clinics: Low and moderate-income taxpayers can seek help at free tax clinics, where an expert will complete your tax returns for you.
• Paper return: You can fill out the tax returns, complete calculations, and then print the form.

Submit your return

Both your federal and provincial tax returns must be filed with the Canada Revenue Agency (CRA). You can do so in one of two ways:

• Electronically: Tax preparation software and some tax professionals give you the ability to file electronically, allowing for faster processing.
• By mail: You can submit a paper return via mail. Visit this site for the address.

Options for paying taxes or getting a refund in Alberta

If you owe federal or provincial taxes, you’ll need to submit payment to the CRA. Payment methods include:

• Direct debit from a Canadian bank account
• Debit or credit card
• Check
• Money transfer platforms, such as PayPal or Interac
• Wire transfer
• Cash

Visit this page to explore payment options and learn how to pay using various methods.

If you’re due a refund, the CRA will mail you a paper check unless you request direct deposit into your Canadian bank account. You can do so online or through your financial institution.

Taxes in Alberta vs. other provinces

Compared to other provinces, Alberta has a few key tax advantages:

• Highest basic and spousal credits: Of all the provinces, Alberta has the highest amounts for both the basic personal and spousal credits, reducing how much residents owe on their taxes. 

• Highest initial marginal tax rate threshold: People earning up to $148,269 qualify for Alberta’s lowest marginal tax rate. The threshold is much higher in Alberta than in other provinces, meaning more people are eligible to pay the lowest possible rate.
• Low GST/HST rates: With a GST of just 5% and no provincial sales tax, Alberta charges less sales tax than most other provinces. 

Compare marginal tax rates and sales tax rates by reviewing this table.

Additional Resources and Tools

Check out these resources to help you complete your federal and provincial tax returns.

Alberta Tax Calculator

Tax calculators can help you determine how much you owe on your taxes. Wealthsimple offers simple-to-use calculators for Canadian federal and Alberta provincial taxes.

Contact Information for Alberta’s Tax Services and CRA

Alberta refers all taxpayers to the CRA for tax questions and assistance. Check out this page for more information about contacting the CRA.

We hope this guide has helped you begin to understand your tax obligations as a resident of Alberta. Fulfilling those obligations is important for your financial health, whether you’re employed, self-employed, or a business owner. Keep in mind that the information outlined above is for general purposes only. Contact the CRA or a knowledgeable tax professional for personalized advice regarding taxation.