Report on Federal Tax Expenditures - Concepts, Estimates and Evaluations 2019: Text version

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Pre-tax income
(Disposable personal income before the application of the tax system)

Components of the Federal PIT System
Include adjustments for the gross-up of dividends received, split income transferred from a spouse, and net capital losses.

Income for federal tax purposes, including exempt income

Components of the Federal PIT System
Subtract the various sources of exempt income (exemptions) for federal tax purposes included in total pre-tax income (including 50 per cent of capital gains).

Income for federal tax purposes
(Corresponds to line 150 of the income tax return minus certain sources of exempt income: workers' compensation benefits, social assistance benefits and net payment of federal supplements)

Components of the Federal PIT System
Subtract the first set of deductions
(mostly related to the accumulation of employment income) to obtain net income, and the second set to obtain taxable income.

Taxable income
(Income used to calculate federal tax payable)

Components of the Federal PIT System
Multiply by the statutory tax rates.

Tax payable on taxable income

Components of the Federal PIT System
Subtract all non-refundable credits (including the Basic Personal Amount) and take into account the Basic Federal Tax.

Net tax payable before tax withholdings transfers and refundable credits

Components of the Federal PIT System
Consider thetax withholdings transfers on split pension income and subtract all refundable credits (e.g., the Canada Workers Benefit and the Refundable Medical Expense Supplement, as well as the Canada Child Benefit and the Goods and Services Tax/Harmonized Sales Tax Credit.)

Net tax payable after tax withholdings transfers and refundable credits
(Pre-tax income minus the amount of net tax payable after tax withholdings transfers and refundable credits equals After-tax income -- Disposable personal income after the application of the tax system)

After the Application of the Federal PIT System

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