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Total Income, Net Income and Taxable Income

Taxable Income - Summary of Calculation

Total Income for Tax Purposes - Line 15000

Net Income Before Adjustments - Line 23400

Net Income For Tax Purposes - Line 23600

Adjusted Family Net Income

Taxable Income - Line 26000

Non-Taxable Income May Affect Tax Credits, Benefits, and Clawbacks

Taxable Income - Summary of Calculation

Personal income taxes are calculated on Taxable Income.

To calculate Taxable Income:

 - first Total Income for Tax Purposes is calculated, 

 - then items are deducted to arrive at Net Income Before Adjustments,

 - then items are deducted to arrive at Net Income for Tax Purposes,

 - then other items are deducted to arrive at Taxable Income.

Total Income for Tax Purposes - Line 15000

Note: Before tax year 2019, line 15000 was line 150.

To calculate Total Income for Tax Purposes, add:

• income from employment and commissions
• other employment income, including income from wage loss replacement plans
• Old Age Security pension from T4A(OAS) slips
• Canada Pension Plan or Quebec Pension Plan benefits from T4A(P) slips
• other pensions or superannuation
• eligible pension income transferred from spouse (see pension splitting)
• Universal Child Care Benefit (UCCB) payments of $100 per month for each dependent child under 6 (claimed on the tax return of the lower income spouse)
• employment insurance and other benefits from T4E slips
• grossed-up Canadian dividends (see dividend tax credit)
• interest and other investment income
• net income from partnerships (limited or non-active partners only)
• net rental income
• current year taxable capital gains in excess of current year allowable capital losses, including gains from the sale of personal use property or listed personal property with a cost exceeding $1,000
• taxable support payments received - see CRA Pamphlet P102 Support Payments and Income Tax Folio S1-F3-C3, Support Payments for information on when support payments are taxable (and deductible to the payer)
• RRSP income from T4RSP slips
• other income, including taxable scholarships, apprenticeship incentive grants, lump sum payments from pensions and deferred profit sharing plans, severance pay and retiring allowances, etc.
• net income from self-employment (business, professional, commission, farming, and fishing)
• Line 14700 other payments (included here, but deducted later, at Line 25000:
  • workers' compensation benefits from T5007 slip
  • social assistance payments
  • net federal supplements from T4A(OAS) slip

The total of the above is total income for tax purposes, line 15000 on the tax return.

Net Income Before Adjustments - Line 23400

Note: Before tax year 2019, line 23400 was line 234.

To calculate Net Income Before Adjustments (line 23400 on the tax return), deduct the following items from Total Income for Tax Purposes:

• registered pension plan deduction from T4 and T4A slips
• RRSP deduction
• FHSA deduction
• Saskatchewan pension plan deduction
• eligible pension income transferred to spouse (see pension splitting)
• annual union, professional, or like dues
• child care expenses
• disability supports deduction
• allowable business investment losses
• moving expenses
• deductible support payments - see CRA Pamphlet P102 Support Payments and Income Tax Folio S1-F3-C3, Support Payments for information on when support payments are taxable (and deductible to the payer)
• carrying charges and interest expense
• deduction for CPP or QPP contributions on self-employment and other earnings
• exploration and development expenses
• other employment expenses
• clergy residence deduction
• other deductions
  • repayment of certain amounts (other than salary and wages) that you included in income in the current year or a previous year, such as OAS benefits
  • repayment of EI benefits (from box 30 of T4E slip)
  • deductible legal fees
  • depletion allowances - see CRA topic Line 22400 (line 224 prior to 2019) -  exploration and development expenses and depletion allowance
  • unused RRSP contributions refunded to you or your spouse in the current year (and included in Total Income) - see CRA forms 
    • T476 - calculating your deduction for refund of unused RRSP contributions, and 
    • T3012A - tax deduction waver on the refund of your unused RRSP contributions
  • capital cost allowance on a Canadian certified feature film or production as per T1-CP slip

The above deductions result in net income before adjustments, line 23400 on the tax return.  The line 23400 amount is used to calculate clawbacks of OAS, employment insurance, and Canada Recovery Benefit, and to calculate Canada Workers Benefit, Medical Expense Tax Credit, and many other tax credits..

Net Income For Tax Purposes - Line 23600

Note: Before tax year 2019, line 23600 was line 236.

From Line 23400, deduct line 23500 (line 235 prior to 2019), social benefits repayment re OAS pension (clawback), employment insurance, net federal supplements, and Canada Recovery Benefit clawback.

The above deduction results in net income (for tax purposes), line 23600 on the tax return.  Line 23600 is used in the calculation of adjusted family net income.

Adjusted Family Net Income

Adjusted family net income is your family net income (line 23600 for individual + spouse/common-law partner, if applicable) minus Universal child care benefit (UCCB) and Registered Disability Savings Plan (RDSP) income plus UCCB and RDSP repayment

This amount is used for many income-tested benefits, such as:

Pharmacare benefits,

GST credit,

Provincial & Territorial tax credits paid with the GST credit

Canada child benefit,

many federal and provincial or territorial non-refundable tax credits

Taxable Income - Line 26000

Note: Before tax year 2019, line 26000 was line 260.

To calculate Taxable Income (line 26000 on the tax return), deduct the following items from Net Income For Tax Purposes:

• Canadian Forces personnel and police deduction
• employee home relocation loan deduction
• security options deductions
• Line 25000 (line 250 prior to 2019) allowable other payments deduction re workers' compensation benefits, social assistance payments, and net federal supplements which were reported on Line 14700 (line 147 prior to 2019)
• limited partnership losses of other years
• non-capital losses of other years
• net capital losses of other years
• capital gains deduction
• northern residents deductions
• additional deductions:
  • foreign income exempt under a tax treaty (if included in Total Income)
  • 15% of U.S. social security benefits included in Total Income as other pensions or superannuation
  • vow of perpetual poverty - deduct earned income and pension benefits given to a religious order
  • qualifying adult basic education tuition assistance, if included in Total Income, from box 21 of T4E slip
  • net employment income from prescribed international organizations

The taxable income is then used to calculate income tax, before deducting non-refundable tax credits and refundable tax credits.

Non-Taxable Income May Affect Tax Credits, Benefits, and Clawbacks

Line 23600, Net Income For Tax Purposes, is used in calculating eligibility for income-tested benefits such as the GST/HST credit and Canada Child Benefit (see more items above).  It is used in the calculation of the medical expense tax credit, age amount, refundable medical expense supplement, and other personal tax credits, and affects the ability of a spouse to claim a spousal tax credit for the taxpayer.  Certain non-taxable items affect these benefits and tax credits, as they are included in Net Income, and deducted later on line 25000 (line 250 prior to 2019) so that they are not included in Taxable Income.  Some of these non-taxable items are:

• workers' compensation benefits
• social assistance payments, and
• net federal supplements from T4(OAS) slip

Capital and non-capital losses carried forward reduce Taxable Income, but not Net Income (line 23600), so are of no benefit when calculating eligibility for income-tested benefits.  Although capital gains may be eliminated by capital losses carried forward, they may trigger a clawback of Old Age Security (OAS) benefits or a clawback of EI benefits, because the clawbacks are based on line 23400 of the tax return.

TaxTips.ca Resources

Tables of Marginal Tax Rates:  The tax rates which are used to calculate income taxes can be found in these tables.

Non-Taxable Income: details of many items which are not required to be included in income.

How is Personal Income Tax Calculated in Canada?

 

Revised: