Part 2 of Preparing a Personal Tax Return
Preparing a Personal Tax Return: What Income Do I Pay Tax On?
As a resident of Canada, you are required to pay tax on your worldwide total income, less all deductions available to you. Further, the Income Tax Act requires you to consider the source of your income by categorizing income into the following sources on your personal tax return:
- Capital Gains
It is important for you to correctly report the source of your income because some deductions can only be applied against a specific source. That said, there are some amounts that you are not required to report as income.
What Amounts Do I Not Pay Tax On?
Some amounts that you are not required to report as income include:
- Amounts exempt by an act of Parliament (e.g., a status Indian’s income situated on a reserve, pursuant to the Indian Act)
- Some social assistance payments that are made to you for the benefit of another person under your care (e.g., amount payed to foster parents)
- Monetary damages that are awarded to you for personal injury
- Some amounts received from war or military service (e.g., certain amounts received under the Canadian Forces Members and Veterans Re-establishment and Compensation Act)
- Winnings from gambling and lottery as a recreational player
- Most gifts and inheritances
- Most amounts received from a life insurance policy
The next few articles will explore available deductions, credits, and expenses you may be eligible for when completing your personal tax return.
-Julian Franch, Associate Lawyer
© Kalfa Law 2018
The above provides information of a general nature only. This does not constitute legal advice. All transactions or circumstances vary, and specified legal advice is required to meet your particular needs. If you have a legal question you should consult with a lawyer.