What is a TD1, actually?
TD1 stands for "Personal Tax Credits Return." That sounds complicated, but the idea behind it is simple: the government lets everyone earn a chunk of money each year completely tax-free. That chunk is called the basic personal amount. Think of it like a free pass: the first slice of your income doesn't get taxed at all, no matter who you are.
The problem is, your employer has no way of knowing how big your tax-free slice should be unless you tell them. That's what the TD1 is for. You fill it out, hand it to your employer, and it tells them "here's how much of my pay should be tax-free, so only tax me on the rest."
Some people also qualify for extra tax-free amounts on top of the basic one, like if they're a full-time student, have a disability, or support a family member. The TD1 is where you claim those too, so your employer can take off the right amount of tax from day one instead of too much or too little.
Wait, there are two of these?
Yep. In Canada, you pay two kinds of income tax at the same time: federal tax (to the whole country) and provincial tax (to whichever province you live and work in). Each one has its own basic personal amount, so each one has its own form.
One version, same for every province (except Quebec, which has its own system). Sets your tax-free amount for federal tax.
A different form for each province, like TD1ON for Ontario or TD1BC for British Columbia. Sets your tax-free amount for provincial tax.
If you live and work in Quebec, you don't use a provincial TD1 at all. Instead, you fill out Revenu Québec's own form, the TP-1015.3-V, because Quebec collects its own provincial tax separately from the CRA.
When do you actually have to fill one out?
You don't fill out a TD1 every single year like a tax return. You fill out a new one only when something changes. The main moments are:
Your new employer needs to know your tax-free amount before they can run your first paycheque correctly.
Got married, had a kid, became eligible for the disability tax credit, started supporting a family member? Any of these can change how much you can claim, so you update your TD1 within 7 days of the change.
You need to fill out a new TD1 for the new employer, but you fill it out a little differently (more on that below).
Your provincial tax-free amount depends on where you live and work, so a move usually means a new provincial TD1.
If nothing in your life has changed, you don't need to redo your TD1 just because a new calendar year started. Your employer carries your existing claim forward.
What's actually on the form?
The TD1 is just a list of tax credits, one per line. Most people only fill in line 1 and skip the rest. Here are the ones you'll actually run into.
You add up whichever lines apply to you, and the total becomes your "total claim amount." The bigger that number, the more of your pay stays tax-free, and the less tax gets held back from each paycheque. The exact dollar amounts change every year, so always use the current year's form. You can find it on the CRA's TD1 forms page.
Claim codes: the shortcut behind the scenes
Here's something most people never see: payroll software and the CRA's own tax tables don't actually work with your exact total claim amount. Instead, the CRA groups every possible total claim amount into ranges (bands), and gives each range a "claim code" number from 0 to 10. Your employer just needs to know which code your number falls into, not the exact dollar figure.
Federal and provincial claim codes are tracked separately, since each has its own basic personal amount and its own set of ranges. That's why payroll software like PayCub asks for a federal claim code and a provincial claim code, picked from two separate select lists. The CRA publishes the current year's exact ranges in the T4032 Payroll Deductions Tables.
Got more than one job? Read this part carefully.
Here's the part that trips people up. Your tax-free basic personal amount only exists once. It's not a "per job" bonus. If you have two jobs and both employers give you the full tax-free amount, you'll end up with way too little tax withheld all year, and a surprise bill when you file your taxes.
That's why the TD1 has a checkbox for "more than one employer or payer at the same time." If that's you, here's the move:
Claim your full basic personal amount and any other credits that apply to you, like normal.
Check the "more than one employer" box and enter $0 as your total claim amount, so that employer withholds tax from the very first dollar.
It feels backwards to claim $0, but it's the right move. It means more tax gets held back during the year, which lines up with how much tax you'll actually owe, instead of leaving you short at tax time. In payroll software, this is the same thing as picking claim code 0 from the select list instead of the matching code for your real total claim amount.
What happens if you just don't fill one out?
Nothing dramatic happens, but it usually costs you in the short term. If an employee doesn't hand in a TD1, the employer is required to withhold tax as if that person only qualifies for the basic personal amount, with none of the extra credits (disability, caregiver, tuition, etc.) factored in.
In practice, that means more tax gets taken off your paycheque than necessary if you actually qualify for extra credits. You're not losing that money forever. You'll get it back as a refund when you file your tax return, but it's sitting in the government's hands instead of your bank account in the meantime.
The fix is easy: fill out the TD1 (and provincial TD1) as soon as you start a job, so your very first paycheque already has the right amount of tax taken off.
How PayCub handles TD1 for you
If you're an employer, you don't have to manually translate TD1 paperwork into tax math, and you don't have to type in exact dollar credit amounts either. Every employee starts out on Claim Code 1 (Minimum) by default, since that's the correct code for the vast majority of employees who don't claim anything beyond the basic personal amount.
If an employee's TD1 shows extra credits, you can change their claim code right from any pay stub, at any time, not just when they're first hired. Click the screenshots below to see exactly where.
How it works in PayCub
When you create an employee's first pay stub, PayCub automatically sets their federal and provincial claim codes to Code 1 (Minimum), the basic personal amount only. That's the right setting for most employees, so there's usually nothing to change.
If an employee's total claim amount is higher than the Code 1 range, click the claim codes field shown on any of their pay stubs to open Payroll Settings, then pick the matching federal and provincial code from the select lists.
Once you save a new claim code, it applies to that stub and every stub after it. You don't need to re-enter it each pay run, and you can come back and change it again whenever the employee's situation changes.
Every pay run, PayCub applies the current year's federal and provincial tax formulas using whichever claim codes are set, so you never calculate it by hand.
TD1 FAQ
No. You give the completed TD1 (and provincial TD1) directly to your employer. They keep it on file and use it to calculate your tax withholding. The CRA never sees the form itself.
Not automatically. You only need a new one if your personal situation changes, like getting married, having a child, or becoming eligible for a new credit. If nothing changes, your existing TD1 stays in effect.
A TD1 is filled out at the start of (or during) employment to tell your employer how much tax to withhold. A T4 is issued at year-end and summarizes how much you actually earned and how much tax was already deducted. One sets the plan, the other reports the results.
Yes. Everyone who earns employment income fills one out, regardless of how much they earn. If your total income for the year will be less than your total claim amount, there's a section on the form for that too, which can reduce withholding even further.
Claim codes are a shortcut. The CRA groups every possible total claim amount into ranges and numbers them 0 through 10, so payroll software (and the CRA's own tax tables) can look up the right tax withholding from a short list instead of an exact dollar figure. You still write your real dollar amount on the TD1 itself; your employer's payroll system converts it into the matching code.
Claim code 0 means $0 in personal tax credits are applied at that job, so tax is withheld from the very first dollar. It's used on the TD1 for a second or third job when you've already claimed your basic personal amount at your main job, to avoid under-withholding.
No. Quebec administers its own provincial income tax separately from the CRA. Instead of a provincial TD1, Quebec residents fill out the TP-1015.3-V form for their provincial tax credits, alongside the federal TD1.
No. Without a completed TD1, employers are required to withhold tax allowing only the basic personal amount, nothing extra. They can't assume you qualify for credits you haven't claimed in writing.
There can be. Commission employees with expenses may also fill out a TD1X, which accounts for expected commission expenses when calculating tax withholding. It's used alongside the regular TD1, not instead of it.
Claim Code 1, often labelled "Minimum," covers the basic personal amount with no extra credits. It's the right code for the vast majority of employees, since most people don't claim anything beyond the basic amount on their TD1. You only need to change it if an employee's total claim amount is higher, because they qualify for credits like the disability amount, tuition transfers, or the caregiver amount.
No manual tax math
TD1 credits, applied automatically
Pick each employee's federal and provincial claim code from a select list, once. PayCub recalculates tax withholding on every pay run, using current CRA rates.
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