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.
Note: Before tax year 2019, line 15000 was line 150.
To calculate Total Income for Tax Purposes, add:
The total of the above is total income for tax purposes, line 15000 on the tax return.
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:
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.
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 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:
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:
The taxable income is then used to calculate income tax, before deducting non-refundable tax credits and refundable tax credits.
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:
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.
The tax rates which are used to calculate income taxes can be found in the tables of marginal tax rates.
See also non-taxable amounts for details of many items which are not required to be included in income.
Revised: July 31, 2023
Copyright © 2002 Boat Harbour Investments Ltd. All Rights Reserved. See Reproduction of information from TaxTips.ca