Young Professionals: What is "income" for tax purposes, and what isn't?

January 09, 2019

Young Professionals: What is

You want to make sure that your tax return is complete and accurate when you file it, to avoid any problems with CRA.  So, it is important to know what counts as “income” that has to be reported on your tax return.  As a young professional, it is most often going to consist of employment income from your jobs, but may also include EI benefits, business income or investment income.  

Your employers should provide you with a T4 slip that shows the amount you were paid, and the corresponding deductions they took for Canada Pension Plan (CPP), Employment Insurance (EI) and income tax.  If you worked for someone and they didn’t deduct these amounts or give you a T4 slip, you may have to report what you earned as business income, since it would appear that they didn’t actually set you up properly as an employee and instead paid you as a contractor.

If you collected EI benefits at any point in the year, you will receive a T4E slip from the government that shows how much you were paid, and any income tax they deducted from the payments.

If you carry on any kind of business activity, either full time or just a side-hustle, you will need to complete a statement of business activities and report the relevant income and expenses related to that activity.  And, if you hold any investments outside of an RRSP or TFSA, any interest, dividends, etc. that you earn on those investments is also part of your taxable income.

Monies that you receive over the year which are NOT income for tax purposes include any kind of loans or other borrowing, gifts or lottery winnings.  Money you get from selling personal items is also generally not income for tax purposes, unless you do it with a frequency and amount such that the tax department considers it to actually be a business activity.  Inheritances are also often not income for tax purposes, but it depends on how the funds are distributed to you by the Estate of the deceased person.






Also in News

Why school still matters for your taxes after graduation
Why school still matters for your taxes after graduation

February 13, 2019

View full article →

RRSP vs TFSA
RRSP vs TFSA

February 07, 2019

Adulting includes making decisions about your long-term financial future and planning for things like retirement (no matter how far off they may seem).  To make it all even more complex, the government and financial institutions have done a great job of using acronyms that you have to learn and understand.  

View full article →

What happens when you get married/become common law?
What happens when you get married/become common law?

February 07, 2019

Once you are married or common law, the two of you are from there forward cross-referenced on each other’s tax returns for the duration of your time together.  You both still each file your own tax return, but you indicate your spouse’s name, SIN and net income on your return (and they do the same for you on theirs).  And, there are credits you may be able to transfer between spouses, and others you will have to ensure are only claimed by one.

View full article →