Taxable income is the amount of income actually subject to tax after all deductions, the figure your tax rate is applied to, which differs from both gross income and accounting profit.
Taxable income is not what you earned or even your accounting profit, it is what remains after subtracting allowed deductions. For a corporation, the T2 starts from accounting net income and adjusts for tax rules: adding back non-deductible items like the 50% of meals, replacing book depreciation with capital cost allowance, and applying loss carryforwards.
For an individual, taxable income is total income less deductions such as RRSP contributions, before non-refundable credits are applied. Understanding the gap between accounting profit and taxable income is central to tax planning, because it is the taxable figure, not the book figure, that drives your bill.
A corporation reports $100,000 accounting profit. After adding back $3,000 of non-deductible meals and swapping $12,000 book depreciation for $15,000 CCA, its taxable income is $90,000, the amount actually taxed.
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Canada runs three systems. The federal GST is 5% for 2026 and applies nationally. Five participating provinces fold a provincial share into one harmonised rate: 13% in Ontario, 15% in New Brunswick, Newfoundland and Labrador and Prince Edward Island, and 14% in Nova Scotia since 1 April 2025. Others add their own tax to the 5% GST, giving 12% in British Columbia and Manitoba, 11% in Saskatchewan and 14.975% in Quebec. Alberta and the territories charge 5% only.
EI benefits are taxable income. Service Canada withholds income tax before each payment reaches you, and the total benefits plus the tax withheld appear on your T4E for the year. That withholding follows a basic calculation rather than your full marginal rate, so people who also worked during the year often end up with a balance owing at filing. Asking Service Canada to withhold more, or setting money aside yourself, avoids a surprise. Higher-income claimants can also have to repay part of their regular benefits through the return.
First Nations, Inuit and Métis individuals pay the same federal and provincial taxes as everyone else, with one narrow exception. Under the Indian Act, a registered status Indian is exempt on income situated on a reserve, judged by connecting factors such as where the work is performed and where the employer is based. Off-reserve employment income is taxable. Related rules can relieve GST/HST on goods delivered to a reserve. Métis and non-status individuals do not get the exemption.
Line 23600 is not on the T4. It is a line on the T1 income tax return, where it reports net income after deductions. The T4 gives you employment income in box 14 along with the amounts withheld, and those figures feed into the return that produces line 23600. When a lender, a benefit application or a sponsorship form asks for line 23600, take it from your filed return or your notice of assessment in CRA My Account.
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Reviewed and fact-checked by Udit Gupta
Ex Big 4 — Ernst & Young, Deloitte · International & cross-border tax specialist · CPA Canada (In-Depth Tax Program) · Chartered accountant, ICAI & MIA
Udit Gupta has over 15 years of experience helping corporations and business owners with corporate structuring, corporate tax filing, bookkeeping, payroll, GST/HST, cross-border tax and CRA representation. Big 4 trained at Ernst & Young and Deloitte, and qualified as a chartered accountant in India and again in Malaysia, he founded his accounting practice in 2014 to serve entrepreneurs, startups and non-resident business owners across Canada. View full member bio.
The Institute of Chartered Accountants of India — member 521458 · Malaysian Institute of Accountants — member CA 44667 · Ex Big 4: Ernst & Young, Deloitte · CPA Canada (In-Depth Tax Program), completed 19 Dec 2023 · In-Depth GST/HST Part I, 12 Jul 2022 · Part II, 5 Jul 2023
Editorial policy. Every page is researched against primary sources — the Income Tax Act, CRA publications and CPA Canada guidance — and every rate or threshold is stated with the tax year it applies to.
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