Employees requesting a reduction in payroll deductions, Form TD1, Personal Tax Credits Return
Employees who live in a prescribed zone during a continuous period of at least six months (that begins or ends in the tax year) may be entitled to claim the northern residents deductions when filing their income tax and benefit returns. As a result, these employees can ask for a Reducing remuneration subject to income tax by completing the back of Form TD1, Personal Tax Credits Return.
The residency deduction is equal to whichever is less:
- 20% of their net income for the year
- the residency amount they can claim
Employees cannot claim a residency amount for both the principal place of residence and the special work site for the same period, even if they are both located in prescribed zones.
For 2022, an employee living in a prescribed northern zone can claim the total of:
- a basic residency amount of $11.00 per day for each day they live in the prescribed northern zone; and
- an additional residency amount of $11.00 per day for each day they live in and keeps a residence in that area, if during that time no one else is claiming a basic residency amount for living in the same residence for the same period.
For 2022, employees living in a prescribed intermediate zone can claim 50% of the total of the above amounts.
Employees who receive board and lodging benefits from employment at a special work site in a prescribed zone have to reduce their residency amount by the value of the 30-kilometre part of the benefit they receive if they keep a principal residence that is not in a prescribed zone. The 30-kilometre part of the excluded benefit will be shown in the "Other information" area under code 31 at the bottom of the employee's T4 slip. For more information, see Board, lodging, and transportation at a special work site in a prescribed zone.
To calculate the amount of tax you should deduct if an employee is claiming a residency deduction on Form TD1:
- reduce the residency amount by 50% if the employee lives in a prescribed intermediate zone (if the conditions noted above apply, reduce the residency amount by the 30-kilometre part of the excluded board and lodging benefits from employment at a special work site)
- divide the employee's net deduction for the year (amount on the back of Form TD1, minus the above adjustments) by the number of pay periods in the year
- subtract the result from their gross earnings for each pay period
- see the tax tables that apply at Payroll Deductions Online Calculator (PDOC), payroll tables, TD1s, and more
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