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

For 2023, 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 2023, employees living in a prescribed intermediate zone can claim 50% of the total of the above amounts.

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