Individuals: Track and report your tips and gratuities

The Canada Revenue Agency (CRA) is reaching out this income tax season to remind Canadians of their tax obligations when it comes to tips and gratuities, and encouraging tip earners to be part of the solution so we all get it right from the start.

Tips and gratuities are taxable income. Taxpayers, employers and the CRA all have a shared interest in voluntary compliance.

Did you know?

In Canada, the amount you earn in tips and gratuities is considered income, and you must declare all of it. How it is reported depends on whether it is received directly or through a controlled arrangement: you are responsible for tracking and reporting direct tips, while your employer is responsible for tracking and reporting controlled tips.

How to report your tips and gratuities

If you receive direct tips or gratuities (amounts paid directly by the customer) as part of the work you do, it is your responsibility to follow these three steps:

  1. Track all your tips and gratuities received throughout the year and keep a copy of your tracking document.
  2. Calculate the total amount between January 1 and December 31.
  3. Report the total amount received on line 104 of your income tax and benefit return.

If any of your tips and gratuities are controlled by your employer, your tip income amount should already be included on your T4 slip. If you’re not sure, ask your employer.

For tips earned within the province of Québec, visit the Revenu Québec website.

Why you should report your tips and gratuities

Above and beyond complying with the law, reporting your tips and gratuities also has financial benefits for you. Reporting boosts your total income, which offers long-term advantages when:

  • Applying for a loan or mortgage – you may qualify for a higher amount;
  • Saving for retirement – your contribution limit for your registered retirement savings plan (RRSP) will be higher; and,
  • Collecting Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) – you can choose to pay CPP or QPP contributions on tips and gratuities earned, which will increase the pension amount you collect when you retire.

For more information on reporting tips and gratuities, please visit Canada.ca/tips-and-gratuities.

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