Learn about your taxes

Common tax terms

A glossary of terms used to learn about your taxes.

Accrual method: An income reporting method that self-employed individuals use. Income is reported in the fiscal period it is earned. Expenses are deducted in the fiscal period they are incurred.
Accumulated income payments (AIP): Amounts, usually paid to the subscriber, of the income earned from an RESP. A subscriber is usually the individual who set up the plan, like a parent or a guardian. There is an additional tax on these payments.
Annual maximum (medical expenses): A value that changes every year due to inflation. All certified tax software will have the current amount. You can also find it on the Canada Revenue Agency website.
Automated Benefits Application: A service individuals use to apply for child and family benefits when they register the birth of their newborn with their province or territory.

Balance owing: An amount generated when you have more amounts payable than credits. This could happen if you did not pay enough tax during the year, for example, if not enough tax was deducted from your pay.
Barter transaction: Trading your goods or services for goods or services provided by another business.
Basic personal amount (BPA): A non-refundable tax credit that can be claimed by all individuals.
Box number: Each information slip is made up of various box numbers that represent specific types of income or credits.
Business expense: A cost you have paid or will pay for the sole purpose of earning business income.

Calendar quarter: A period of 3 months beginning on the first day of January, April, July, or October in each calendar year.
Calendar year: The dates from January 1 to December 31 that are used for personal income tax purposes.
Canada child benefit (CCB): A tax-free payment that helps eligible families with the cost of raising children under 18 years of age.
Canada Pension Plan (CPP): A social insurance plan funded by the CPP contributions of employees, employers and self-employed individuals. Retirement pension or other benefits are paid out to the contributors and their families in the event of retirement, disability or death.
Canada Revenue Agency (CRA): The agency responsible for collecting taxes and administering various benefits and credits.
Canada training credit: A refundable tax credit available to help Canadians with the cost of eligible training fees.
Canada workers benefit (CWB): A refundable tax credit that is intended to supplement the earnings of low-income workers.
Capital cost allowance (CCA): A deduction you can claim over several years for the cost of depreciable property that is used to earn self-employment or business income. Examples of depreciable property include a building, vehicle, furniture, or equipment that you use in your business or professional activities.
Carry forward: If you do not use certain credits, such as tuition amounts, they will be available on your account for you to claim in a future year.
Carryforward amounts (also known as Carryover amounts): Unused tax credits from a prior year that you may be able to claim in a future year, such as tuition amounts.; carry forward amounts, carry over amounts
Cash method: An income reporting method that farmers, fishers, and self-employed commission agents use. Income is reported in the fiscal period it is received. Expenses are deducted in the fiscal period they are paid for.
Citizenship status: The legal citizenship status of a person in Canada, including statuses such as citizen, permanent resident, visitor, permit holder, refugee, and temporary worker.
Class: A grouping or category of similar depreciable property. Legislation determines the rate assigned to different types of depreciable property in a category. This rate is used to calculate the capital cost allowance deduction.
Canada Carbon Rebate (CCR) (formerly known as Climate action incentive payment): A benefit available to residents of Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, and Saskatchewan who are 18 or older.
Commission agent: A person who earns commission by selling goods belonging to others on their behalf.
Compound daily interest: A daily charge on your updated account balance, including the interest from your previous balance, if you have one.
Conjugal relationship: A relationship between 2 individuals that is marriage-like.
Corporation: A business that has been incorporated, making it a separate entity, and the owner of which is no longer considered self-employed.

Deductions

Certain amounts or expenses that reduce the income you pay tax on.

Dependant (amount for an eligible dependant)

A person who, at any time in the year, is dependent on you for support.

For this credit, the dependant must also have been either:

your parent or grandparent by blood, marriage, common-law partnership, or adoption
your child, grandchild, brother or sister by blood, marriage, common-law partnership, or adoption and was under 18 years of age or had an impairment in physical or mental functions

Depreciable property

Property, such as a building, furniture, or equipment, that is used for business purposes over a longer period of time. This is usually capital property used to earn income from a business or property. The capital cost can be written off as capital cost allowance (CCA) over a number of years.

Digital economy

The use of information technology to create, adapt, market, or consume goods and services. For example, e-commerce, virtual education, smartphone apps, and collaboration platforms.

Disability tax credit (DTC)

A non-refundable tax credit that helps persons with disabilities or their supporting persons reduce the amount of income tax they may have to pay. To be eligible, you must have an approved T2201, Disability Tax Credit Certificate, on file with the Canada Revenue Agency.

Discounted refund

The amount the discounter pays you. The discounter can only discount your refund by amounts pre-determined by the Tax Rebate Discounting Act.

Earned income: It is calculated by adding your employment earnings and self-employment earnings. It will be reduced if you have employment expenses or rental losses.
Educational assistance payments: Amounts paid to a beneficiary (a student), from an RESP to help finance the cost of post-secondary education. An EAP consists of the Canada education savings grant, the Canada learning bond, amounts paid under a designated provincial program and the earnings on the money saved in the RESP.
Eligible child (child care expenses): They must be one of the following:

your or your spouse's or common-law partner's child

a child who was dependent on you or your spouse or common-law partner and whose net income was less than the allowable maximum for the year; The child must have been under 16 years of age at some time in the year. However, the age limit does not apply if the child had an impairment in physical or mental function and was dependent on you or your spouse or common-law partner.
Eligible individual (tuition amount): They must be:

your spouse or common-law partner

your parent or grandparent, or your spouse’s or common-law partner’s parent or grandparent
Employee: A person who works for another person or a company (the employer) under contract of service. For example, the employer can control the details of the employee’s work, including how and when the work will be done.
Employment insurance (EI): A program administered by Employment and Social Development Canada. It provides benefits to individuals who lose their jobs through no fault of their own and are available for and able to work, but can’t find a job. This program also offers benefits related to parental, sickness, and caregiving leave.

Fair market value: The highest dollar value that a product, property or service can be sold for in the open market.

Goods and services tax/harmonized sales tax (GST/HST): A tax you pay on most goods and services sold or provided in Canada. In New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island, the GST has been blended with the provincial sales tax (PST) and is called the harmonized sales tax (HST).
Goods and services tax/harmonized sales tax (GST/HST) credit: A tax-free payment that eligible individuals receive every 3 months. It helps individuals and families with low or modest incomes offset the GST or HST they pay.
GST/HST account: A Canada Revenue Agency (CRA) account that allows you to begin to charge GST/HST for your business. To register for this account, you must first register for a business number with the CRA.

Income tax and benefit return: The Canadian tax return that individuals complete every year to calculate whether they owe tax on their income. They must also complete the return to receive federal and provincial or territorial benefits and credits. The process of completing and submitting your tax return to the Canada Revenue Agency is often referred to as "filing your taxes" or "doing your taxes."
Incorporation: The process of registering your business at the federal or provincial level to create a new legal entity called a corporation. An incorporated business has the same legal rights as a person.
Inflation: The rise of the average prices of common goods and services over time.
Information slip: Most income that you received during the year is reported on an information slip. These slips may also contain details about credits that you can claim.
Input tax credits: Credits that businesses can claim for the GST/HST they paid on goods and services that they bought to produce goods or services for their business.
Interest: The rate of interest the CRA charges on current or previous balances can change every 3 months based on prescribed interest rates.
Issuer: An individual or company, also known as a payer, that paid you and issues you an information slip, such as your employer or your financial institution.

Late-filing penalty: An amount of money that is charged if you file your tax return after the due date and have a balance owing. This amount is in addition to interest charges.
Line: A place on the tax return where you report a specific type of income or tax credit.
Loss: When the expenses paid to earn your self-employment or business income are higher than the income you earned in the same period.
Low income (Canada workers benefit): The eligible threshold for this credit is different for some provinces and territories. It will also change if you have a spouse or common-law partner or a dependant.

Maximum (tuition amount): You may transfer a maximum of $5,000 of the current year’s federal tuition amount, minus the amount you used to reduce your tax owing. The provincial or territorial maximum varies.
My Account: The CRA's secure online portal for individuals to view and manage personal income tax and benefit information. You must have filed your taxes at least once before you can register for this service.

Net income: Your income after deducting certain amounts from your total income. It is used to determine if you are eligible to claim certain tax credits, or if you are entitled to certain benefits and credits.
NETFILE Access code: A code comprised of eight characters including numbers and letters. It is not mandatory, but if you do not enter your Access code when you do your taxes electronically, you will not be able to use any information from that tax return when confirming your identity with the CRA.
NETFILE-certified tax software: A tax preparation software is “certified” when the developer has gone through a process with the CRA to make sure its software is compatible with the CRA’s systems.
Newborn Registration Service: A service used to establish a permanent, legal record of the person’s birth, which is then used for requesting things such as a birth certificate, SIN, or accessing other important services for the child.
Non-refundable tax credits: Credits that reduce the taxes you owe, but only to zero. They cannot be refunded to you.
Notice of assessment: The document that the CRA sends you after processing and assessing your tax return.

Partnership: The ownership of a business is shared between two or more individuals, partnerships, or corporations.
Pay stub: A document that shows how your pay was calculated during a particular pay period.
Payer: An individual or company, also known as an issuer, that paid you and issues you an information slip such as your employer or your financial institution.
Payroll deductions: Amounts that your employer takes off of your pay. Generally, this includes amounts such as income tax, Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) contributions, and Employment Insurance (EI) premiums.
Platform economy: The use of mobile apps or internet apps to connect buyers with sellers and service providers.
Profit: When the expenses paid to earn your self-employment or business income are lower than the income you earned in the same period.

Quebec Pension Plan (QPP): A retirement pension administered by Retraite Québec. It also offers additional payments related to health and disability.

ReFILE: An online service that lets individuals send online adjustments for income tax and benefit returns with NETFILE-certified software.
Refund: An amount generated when you have more credits than amounts payable. This could happen if you paid more tax during the year than you actually owe, for example, through the tax that was deducted from your pay. It could also happen if you are entitled to any refundable tax credits.
Refundable tax credits: Amounts that help reduce your tax payable, and any excess amounts can be refunded to you.
Registered disability savings plan (RDSP): A savings plan intended to help parents and others save for the long-term financial security of a person who is eligible for the disability tax credit (DTC).
Registered education savings plan (RESP): A savings plan used to save for a child’s post-secondary education.
Registered retirement savings plan (RRSP): A retirement savings and investment plan that individuals can open an account for and contribute to. Deductible contributions can be used to reduce your income tax.
Remit: Send an amount of money to the CRA that your business collected as GST/HST.
Report: To include information on your tax return.
Residency status: An individual becomes a resident of Canada for income tax purposes once they have established significant residential ties in Canada, such as home, a spouse or common-law partner, or dependants.
Rideshare: An arrangement an individual makes, using a website or mobile app, to travel as a passenger in another person’s vehicle for a fee.

Schedule: A type of form that is completed with the tax return. Each schedule is used to calculate for a particular type of income, deduction, or tax credit.
Self-employed: An individual who earns business income by working directly with clients or customers, under a contract for services.
Small supplier: A self-employed individual or business earning less than $30,000 during a calendar quarter or over the last four consecutive calendar quarters.
Social insurance number (SIN): A 9-digit identification number that you need to work in Canada and to receive benefits and services from the government.
Sole proprietorship: There is one owner of the business, and the business is not incorporated.
Support: To provide basic necessities of life such as food, shelter and clothing to an individual.

T4 slip: A tax document given to you by your employer that outlines your employment earnings and payroll deductions for the year.
TD1, Personal Tax Credits Return: A form that you must complete when you start a new job. You provide information about your tax situation so that your employer can pay you accurately.
Tax brackets: Pre-determined levels of income that are used on the tax return to calculate the taxes you owe.
Tax credits: Amounts that help reduce the taxes that you owe. Some can only reduce your taxes to zero, while others can be refunded to you.
Tax-Free Savings Account (TFSA): An account that lets you save money throughout your lifetime. Your contributions to the account, and income earned in the account, are generally tax-free, even when you withdraw them.
Tax rate: A pre-determined percentage used to calculate the taxes you owe.
Tax year: The dates from January 1 to December 31. Each personal income tax and benefit return includes the information from one tax year.
Taxable income: Your income after deducting certain amounts from your net income. It is used to calculate how much tax you owe. In Canada, you are subject to federal and provincial or territorial tax. Residents of Quebec will calculate their provincial tax owing with Revenu Québec.
Taxes: Mandatory payments that help the government fund social programs and benefits. One of the most common types of taxes that you pay is income tax.
Total credits: This amount includes your income tax deducted at source and your refundable tax credits, which reduce your tax payable and any excess amounts can be refunded to you.
Total income: The sum of all income that you earned or received during the year.
Total payable: The sum of all the amounts you owe, most commonly your federal and provincial or territorial taxes.

Union dues: Contributions that members make to their union to help fund the union’s activities.

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Date modified:: 2024-04-22

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Common tax terms

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