There are often misconceptions about what sources of income need to be reported on tax returns in Canada. So today I want to talk about income that must be included on your tax return and income you don’t have to report.
Amounts Included In Income
Here is a listing of many of the incomes you’ll be required to report:
- Employment income including salary, wages, tips and bonuses
- Commission income from employment
- Foreign employment income
- Employment income not reported on your T4, such as tips and occasional earnings
- Security option benefits
- Emergency service volunteer income
- Amounts paid through a wage loss replacement plans less unused contributions made to the plan
- Net research grants
- Housing allowance or amounts for eligible utilities for clergies
- Veteran benefits
- Royalties
- GST/HST rebates for employment expenses from the previous year
- Amounts paid for under a supplementary unemployment benefit plan
- Amounts from employee profit sharing plan
- Premiums paid to a group term life insurance plan
- Medical premium benefits paid by former employer
- Amounts received under a Wage Earner Protection Program from employer bankruptcy or insolvency
- Old Age Security (OAS) payments
- Canada Pension Plan (CPP) payments including survivor, disability, child and death benefits
- Other pension or superannuation income
- Income from annuities, pooled registered pension plans (PRPP) and register retirement income funds (RRIF)
- Income from registered retirement savings plans (RRSP)
- Income from registered disability savings plan (RDSP)
- Income from registered education savings plan (RESP)
- Foreign pension income
- Split-pension income
- UCCB if you have received a payment for a previous year
- Employment Insurance (EI) benefit payments
- Taxable dividends from Canadian corporation
- Interest on investments including bank accounts (you may not receive a slip if interest was under $50), term deposits, guaranteed investment certificates (GICs) and similar investments
- Interest on Canada savings bonds (CSBs)
- Dividend income
- Foreign income from dividends or interest
- Earnings accumulated on life insurance policies
- Net proceeds on treasury bills
- Net partnership income
- Rental income
- Capital gains
- Social assistance payments
- Support payments
- Worker compensation benefits
- Retiring allowances, you receive to recognize long service or from loss of employment
- Death benefits
- Lump sum payments from pension and deferred profit-sharing plans
- Certain scholarships, fellowships, bursaries, and artists' project grants
- Apprenticeship incentive grant and apprenticeship completion grant
- Income from a retirement compensation arrangement
- Training allowances
- Income from trusts
- Taxable amounts from TFSA
- Payments received through income support for parents of Murdered or Missing Children
- Income from the disposition of Canadian Resource Property
While this list can seem daunting and appears to include all income, there are some sources of income that don’t need to be reported.
Amounts Not Included In Income
There are some income amounts that tax legislation says do not need to be included in income. Others are not reported because they don’t apply to any of the broad categories of income.
Some of the more common amounts that you will not need to report are:
- Gifts
- Inheritances
- Lottery winnings
- Winnings from betting and gambling
- Life insurance policy payments
- Payments paid to a victim of a criminal act
- Payments paid to a victim of a car accident
- Payments made for the disability or death of a war veteran
- Scholarships from elementary or secondary schools
- Scholarships, fellowships and bursaries for full-time post-secondary students
- First Nation income earned on a reserve
- GST/HST Credit
- Canada Child Benefit (CCB)
- Income from a TFSA
In most cases you will receive a T-slip for amounts you’re required to report on your tax return, with some exceptions (like investment interest under $50 on bank accounts). But even if you don’t get a T-slip, you’re still required to report income. And there are also exceptions for some of the amounts you don’t have to include. This makes it very important to have a basic understanding of the incomes you need to report or to get the help of a tax planning professional to make sure you don’t misrepresent your income on your tax return. Doing so could result in paying too much tax or risking audit adjustments and penalties at a later date.
If you have received a new type of income and are not sure how to report it on your tax return, please contact us today.
