Attribution Rules

A tax deduction is an amount subtracted from your income before tax is worked out, so it reduces the income being taxed rather than the tax bill directly. Its worth depends on your marginal rate: the higher the rate, the more the deduction saves. Common examples are RRSP contributions, child care costs, union dues, moving expenses and business expenses. Credits work the other way, reducing the tax calculated on that income.

Multiply the assessed value of the property by the tax rate for its property class. Assessment is set by a provincial assessment authority on its own cycle and increases are often phased in, so the value lags the market. The rate is set each year by the municipality out of its budget, with an education portion added by the province. Both figures appear on your notice, which is why identical homes in different municipalities carry different bills.

Non-taxable income is money you receive that never enters taxable income. Common examples are lottery and most gambling winnings, gifts and inheritances, growth and withdrawals inside a TFSA, the GST/HST credit and Canada child benefit, most life insurance death benefits, and child support under current-rule agreements. A few amounts are reported and then deducted, such as workers' compensation and social assistance, because they still affect benefit calculations, so report anything that arrives on a slip even when no tax results.

Federal personal income tax arrived in 1917, when the Income War Tax Act was passed as a temporary measure to help finance the First World War. It reached only a small number of high earners at first, and although it was passed as a temporary wartime measure the tax was never withdrawn: the Income War Tax Act was replaced by a new Income Tax Act after the Second World War, and today's Act descends from that line. A federal tax on business profits had been introduced the year before, and the personal system broadened steadily over the following decades as rates, credits and withholding were added.