Contra Account

Taxable income is what is left after you total the income the tax rules include and subtract the deductions you are allowed. Employment and self-employment earnings, most pensions, EI and CPP benefits, interest, dividends, rental profit, the taxable portion of capital gains, RRSP and RRIF withdrawals and most taxable benefits from work all go into the total. Tax is then calculated on that figure and reduced by non-refundable credits such as the basic personal amount.

Federal tax is the share of income tax that goes to the federal government, charged on taxable income in graduated brackets that are the same everywhere in Canada. Your total bill is that federal amount plus your province or territory's own tax, less the credits you claim. Payroll deductions shown on a T4 cover both layers. Quebec residents receive a refundable abatement of their federal tax because Quebec opted out of certain federal-provincial programs and funds them itself; separately, Quebec also collects its provincial tax through its own return.

Start with deductions that lower taxable income: RRSP contributions, childcare, eligible moving expenses, employment expenses your employer certifies, and interest on money borrowed to invest. Then claim credits, including tuition, medical expenses, donations and pension income splitting. Rental owners deduct mortgage interest, property tax, insurance, utilities and repairs on the rented portion, while improvements are capitalised and depreciated instead. Income splitting with family members runs into attribution rules, so get the structure checked first.

No. The fuel charge applies to fuels, not tobacco. Cigarettes carry federal excise duty, a provincial or territorial tobacco tax, and GST or HST on the shelf price, which is why tax makes up most of what you pay. Duty and tobacco tax rates move with budgets and some federal rates are adjusted annually, so check the CRA excise duty rates page and your province's tobacco tax page rather than an older figure.