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- Determine the net taxable income for the pay period (remuneration minus allowable deductions) and multiply it by the number of pay periods in the year to get an estimated annual taxable income amount.
- Calculate the basic federal tax on the estimated annual taxable income, after allowable federal personal tax credits.
- Calculate the annual federal tax payable.
- Calculate the basic provincial or territorial tax on the estimated annual taxable income, after allowable provincial or territorial personal tax credits.
- Calculate the annual provincial or territorial tax deduction.
- Add the federal and provincial or territorial tax and divide the result by the number of pay periods to find the estimated federal and provincial or territorial tax deductions for a pay period.
Option 2 – Tax formula based on cumulative averaging:
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