Are You Required to Make Quarterly Tax Remittances in Canada?

Quarterly tax payments in Canada

If you’ve received a notice from the Canada Revenue Agency (CRA) telling you to start making quarterly tax installment payments, it can be unsettling—especially if your income is lower than it was last year. The CRA’s installment notices are sometimes based on prior years’ tax amounts, which can lead to overpaying if your income has dropped. This guide explains who must pay, the payment dates, how installments are calculated, and practical ways to avoid penalties while keeping your cash flow under control.

What are the quarterly income tax payment dates in Canada?

When you are required to make quarterly tax installments, payments are due on or before these dates each year:

• March 15
• June 15
• September 15
• December 15

For taxpayers in the farming and fishing industries the rules differ: often only a single installment is required on December 31.

Who must make quarterly tax installments?

The CRA requires installment payments when your net taxes owing exceed a specified threshold. In most of Canada that threshold is $3,000 in taxes payable in the current year and in either of the two preceding years after accounting for taxes withheld at source. For Quebec residents the threshold is $1,800.

Farmers and fishers follow a different rule: one installment may be required if net tax owing is $3,000 in the current tax year and in both of the preceding two years.

People commonly required to make installments include those who do not have enough tax withheld at source—such as self-employed individuals, investors, pensioners with insufficient withholding, rental property owners, and taxpayers who realized significant capital gains. If you receive a CRA notice, it means the agency believes your tax owing meets the threshold and you should prepare to remit installments.

How are quarterly tax installments calculated?

There are three accepted ways to calculate your installment payments. Choose the method that best reflects your expected tax situation for the year.

1. Current-year option
   Estimate the taxes you expect to owe for the current year. This is a good choice if you anticipate a drop (or rise) in income compared with last year. If your estimated taxes payable exceed $3,000 (or $1,800 in Quebec) after considering any withholdings, divide that final amount by four. Each quarter you would remit one-quarter of the estimated annual tax. Remember to factor in any RRSP contributions or other deductions and credits that will reduce your tax payable.
2. Prior-year option
   Base your installments on last year’s tax payable. This approach is useful when this year’s income is expected to be similar to last year’s and provides a straightforward calculation.
3. CRA billing method (no-calculation option)
   If the CRA sends an installment notice, you can simply follow the amounts on that notice and remit by the due dates. If you pay exactly the amounts shown on the CRA notice on time, you will not be charged interest or penalties even if the final tax owed when you file is higher.

Note: If you use the current-year or prior-year options and the actual tax owing at filing time is greater than you estimated, interest and possible penalties may apply.

Is there a form or chart to help with the calculations?

The CRA provides an installment chart and guides to help taxpayers plan payments. You will still need to calculate your estimated federal tax payable first (line 42000 on the T1), so using tax preparation software or an accountant can simplify the math and reduce errors.

Do CPP and EI premiums affect your installments?

Yes and no. Self-employed taxpayers must include Canada Pension Plan (CPP) contributions when estimating total remittances, and may include Employment Insurance (EI) premiums if they have opted into EI. CPP and EI contributions are additional to income taxes and should be included in installment calculations when applicable. However, CPP/EI do not change the CRA’s $3,000 (or $1,800 in Quebec) installment threshold: if your income tax liability excluding CPP/EI is below that threshold, CPP/EI will not suddenly trigger installment requirements on their own.

Top five questions about quarterly tax installments

Below are answers to common concerns that taxpayers raise when they face installment requirements.

What happens if I am late paying a quarterly tax bill?

If you are late or underpay installments and you did not rely on the CRA’s billing method, the CRA will charge interest on the shortfall. Interest accrues daily and is compounded; at current prescribed rates this can grow quickly. To reduce accumulating interest, consider making the next installment early or paying extra in the next remittance to cover any shortfall.

What are the penalties for missing or underpaying installments?

Besides interest, the CRA may assess penalties if your interest charge exceeds a certain amount. Penalties are calculated under specific rules and can be significant when large shortfalls exist. Generally, if installment interest exceeds a threshold, the penalty can be a portion of that interest. If you’re uncertain, speak with a tax professional to estimate potential penalties before filing.

What if my income changes from year to year?

If your income fluctuates, you can reduce taxable income and therefore lower installment obligations by maximizing eligible deductions and credits: RRSP or FHSA contributions, claiming childcare or moving expenses, tuition credits, medical expenses, charitable donations, or other allowable deductions. Self-employed taxpayers should ensure they claim all legitimate business deductions and capital cost allowances to reduce net business income.

Do I have to make quarterly tax payments?

No. If your income is much lower this year and sufficient tax is being withheld at source, you may not need to make installments. If withholding covers your expected tax liability, you can keep those funds for other purposes—investing, paying down debt, contributing to an RRSP or RESP, or other financial priorities.

Will anything be different in 2024 compared with prior years?

Yes. For Canadians who sold a cottage or rental property on or after June 25, 2024, the capital gains inclusion rate for gains above $250,000 increased to 66%. That change may have resulted in a larger-than-expected tax bill for 2024. If you realized a significant one-time gain, carefully estimate your 2024 taxes and consider how that affects installment requirements for 2025. If the gain was a one-off event and your income will fall next year, consider the CRA’s no-calculation option or adjust your installments to reflect the expected lower income.

Read more about income taxes:

• Tax credits, due dates and when you can file: Your income tax return guide
• Audit-proof your side hustle
• What to do if you haven’t filed an income tax return
• Renting out the cottage? Don’t miss out on these 11 tax-deductible expenses