Introduction
Welcome to Tax Depot’s comprehensive glossary of Canadian tax terminology. This resource aims to demystify the complex language of taxation, helping Canadian taxpayers better understand their obligations and entitlements. Whether you’re preparing your annual tax return, planning for retirement, or starting a business, this glossary will serve as your guide through the maze of Canadian tax jargon.
A
Adjusted Cost Base (ACB): The original cost of an investment plus any expenses incurred to acquire it, adjusted for reinvested distributions, returns of capital, and other factors. The ACB is used to calculate capital gains or losses when the investment is sold.
Assessment: The review of a tax return by the Canada Revenue Agency (CRA) to verify its accuracy and determine the amount of tax payable.
Alternative Minimum Tax (AMT): A parallel tax calculation designed to ensure that individuals with substantial income cannot use certain tax preferences to avoid paying a reasonable amount of tax.
B
Basic Personal Amount (BPA): A non-refundable tax credit that can be claimed by all individuals. It represents the amount of income that an individual can earn without paying federal income tax.
Business Number (BN): A unique identifier assigned by the CRA to businesses and other organizations for tax purposes.
Benefit Year: The 12-month period from July 1 to June 30 during which benefits such as the Canada Child Benefit (CCB) are paid, based on the previous year’s income.
C
Canada Child Benefit (CCB): A tax-free monthly payment made to eligible families to help with the cost of raising children under 18 years of age.
Canada Pension Plan (CPP): A mandatory contributory public pension plan that provides retirement, disability, and survivor benefits to eligible individuals and their families.
Capital Cost Allowance (CCA): The tax deduction that Canadian tax laws allow businesses to claim for the depreciation or amortization of capital assets.
Capital Gain: The profit realized from the sale of capital property, such as investments or real estate, when the proceeds exceed the adjusted cost base.
Carrying Charges: Expenses incurred to earn investment income, such as interest on money borrowed to earn investment income, investment counsel fees, and accounting fees.
Clawback: The reduction of certain income-tested benefits as income increases, such as Old Age Security or Employment Insurance benefits.
Common-law Partner: A person who has been living with you in a conjugal relationship for at least 12 continuous months, or is the parent of your child by birth or adoption, or has custody and control of your child.
Corporate Tax: Tax levied on the profits of corporations.
CRA My Account: An online service that lets individuals view their personal income tax and benefit information and manage their tax affairs online.
D
Deemed Disposition: A situation where the CRA treats property as having been sold, even though no actual sale took place, such as when a taxpayer dies or changes the use of a property.
Deduction: An amount that can be subtracted from total income when calculating taxable income.
Dependant: A person who relies on another person for financial support, such as a child, spouse, or common-law partner.
Direct Deposit: An electronic funds transfer method used by the CRA to deposit refunds and benefit payments directly into a taxpayer’s bank account.
Dividend Tax Credit: A non-refundable tax credit that reduces the amount of tax payable on dividends received from Canadian corporations.
E
Earned Income: Income from employment, self-employment, research grants, and disability payments from the CPP or QPP used to calculate RRSP contribution limits.
Employment Insurance (EI): A federal program that provides temporary financial assistance to unemployed Canadians while they look for work or upgrade their skills.
Employment Income: Salaries, wages, commissions, bonuses, tips, gratuities, and other remuneration received from employment.
Executor: The person named in a will to administer the estate of a deceased person.
F
Fair Market Value (FMV): The highest price, expressed in terms of money, that a property would bring in an open and unrestricted market between a willing buyer and a willing seller, both of whom are knowledgeable, informed, and prudent.
Family Tax Cut: A former tax credit that allowed a higher-income spouse to notionally transfer up to $50,000 of taxable income to a spouse in a lower tax bracket. This credit was eliminated in 2016.
Filing Date: The deadline for submitting a tax return to the CRA, typically April 30 for individuals and June 15 for self-employed individuals and their spouses.
First-Time Home Buyers’ Tax Credit (HBTC): A non-refundable tax credit designed to help first-time home buyers with the costs associated with purchasing a home.
Foreign Tax Credit: A credit that helps prevent double taxation by allowing taxpayers to deduct foreign taxes paid from their Canadian tax liability.
G
Goods and Services Tax (GST): A federal tax applied to most goods and services in Canada.
Gross Income: The total income from all sources before deductions are applied.
GST/HST Credit: A tax-free quarterly payment that helps individuals and families with low and modest incomes offset all or part of the GST or HST that they pay.
H
Harmonized Sales Tax (HST): A combined federal and provincial sales tax collected in participating provinces.
Home Accessibility Tax Credit (HATC): A non-refundable tax credit for qualifying renovation expenses incurred for a qualifying individual.
Home Buyers’ Plan (HBP): A program that allows first-time home buyers to withdraw up to $35,000 from their RRSPs to buy or build a qualifying home without paying tax on the withdrawal.
I
Income Splitting: Various strategies used to shift income from a family member in a higher tax bracket to a family member in a lower tax bracket, thereby reducing the family’s overall tax burden.
Income Tax: A tax levied by the government on the income of individuals and corporations.
Instalment Payments: Periodic tax payments required from individuals who earn income that is not subject to sufficient tax withholding at source, such as self-employment income or rental income.
Interest Income: Income earned from investments such as savings accounts, GICs, bonds, or loans.
L
Lifelong Learning Plan (LLP): A program that allows withdrawal of funds from RRSPs to finance full-time training or education for you or your spouse/common-law partner.
Limited Partnership: A partnership in which some partners have limited liability and limited control over the business operations.
Linked Notes: Complex investment products that combine features of fixed-income securities and derivatives.
Listed Personal Property: A special category of personal-use property that includes art, jewelry, rare books, stamps, and coins.
Loss Carryover: The ability to apply a loss from one tax year to reduce taxable income in other years.
M
Marginal Tax Rate: The percentage of tax applied to the last dollar of income or next dollar earned.
Medical Expenses Tax Credit: A non-refundable tax credit for qualifying medical expenses paid by an individual for themselves, their spouse, or their dependants.
Moving Expenses: Costs incurred when moving for work or education purposes, which may be deductible under certain conditions.
N
Net Income: Total income minus allowable deductions, used to determine eligibility for certain credits and benefits.
Net Capital Loss: A loss realized from the disposition of capital property that exceeds capital gains in the same tax year. Net capital losses can be carried back 3 years or forward indefinitely.
Non-Refundable Tax Credit: A tax credit that can reduce tax payable to zero but cannot result in a refund.
Notice of Assessment: A statement sent by the CRA after a tax return has been processed, showing the assessment of tax, any refund or balance owing, and any corrections made to the return.
O
Old Age Security (OAS): A monthly payment available to seniors aged 65 and older who meet Canadian legal status and residence requirements.
P
Pension Income: Income from registered pension plans, RRIFs, annuities, and certain other sources that may qualify for the pension income credit and pension income splitting.
Pension Income Credit: A non-refundable tax credit available to individuals who receive eligible pension income.
Pension Income Splitting: A provision that allows a taxpayer to allocate up to 50% of their eligible pension income to their spouse or common-law partner for tax purposes.
Personal Tax Credits: Credits that reduce the amount of income tax owed, based on personal circumstances such as age, disability, or dependent status.
Principal Residence: A housing unit owned and ordinarily inhabited by the taxpayer or family members during the year, which may be exempt from capital gains tax when sold.
Provincial Tax: Income tax levied by provincial or territorial governments in addition to federal income tax.
Q
Qualified Disability Trust (QDT): A trust that elects to be a QDT and qualifies for special tax treatment, including access to graduated tax rates.
Quebec Pension Plan (QPP): The Quebec equivalent of the Canada Pension Plan, providing retirement, disability, and survivor benefits to eligible Quebec residents.
Quebec Sales Tax (QST): A provincial sales tax applied to most goods and services in Quebec.
R
Refundable Tax Credit: A tax credit that can result in a refund when the credit amount exceeds the tax payable.
Registered Disability Savings Plan (RDSP): A savings plan designed to help parents and others save for the long-term financial security of a person who is eligible for the disability tax credit.
Registered Education Savings Plan (RESP): A tax-deferred savings plan that helps an individual save for a beneficiary’s post-secondary education.
Registered Pension Plan (RPP): An employer-sponsored pension plan registered with the CRA and provincial or federal pension authorities.
Registered Retirement Income Fund (RRIF): A fund that provides retirement income from RRSP savings. RRSPs must be converted to RRIFs or annuities by the end of the year in which the holder turns 71.
Registered Retirement Savings Plan (RRSP): A tax-deferred retirement savings plan that allows individuals to deduct contributions from their income and defer tax on the earnings until funds are withdrawn.
Rental Income: Income earned from renting property, such as real estate, which must be reported on a tax return.
Residency Status: A person’s status as a resident, deemed resident, non-resident, or deemed non-resident of Canada for tax purposes.
Return of Capital (ROC): A distribution to investors that represents a return of their original investment rather than a return on their investment. ROC is not taxable but reduces the adjusted cost base of the investment.
S
Self-employment Income: Income earned from carrying on a business or profession as a sole proprietor or partner.
Spousal RRSP: An RRSP owned by one spouse or common-law partner to which the other spouse or common-law partner contributes, allowing for potential income splitting in retirement.
Spousal Tax Credit: A non-refundable tax credit that may be claimed by a taxpayer who supports a spouse or common-law partner with little or no income.
Superficial Loss: A loss on the disposition of a capital property when the same or identical property is acquired by the taxpayer, their spouse, or a corporation controlled by either of them, within a period beginning 30 days before and ending 30 days after the disposition.
T
T1 General: The main personal income tax return form used by individuals to file their annual income tax returns.
T4 Slip: A statement of remuneration paid by an employer to an employee during the year, showing income, CPP/QPP contributions, EI premiums, and income tax deducted.
Tax-Free Savings Account (TFSA): A registered account in which investment income, including capital gains, is not taxed and withdrawals are tax-free.
Tax Rate: The percentage of tax applied to income.
Tax Treaty: An agreement between Canada and another country that aims to prevent double taxation and fiscal evasion.
Taxable Income: The amount of income subject to tax after all deductions have been applied to net income.
Tuition Tax Credit: A non-refundable tax credit available to students based on eligible tuition fees paid for post-secondary education.
U
Universal Child Care Benefit (UCCB): A former taxable benefit paid to eligible families with children under 18 years of age. It was replaced by the Canada Child Benefit in 2016.
Unused RRSP Contribution Room: The accumulated RRSP contribution room that was not used in previous years and can be carried forward indefinitely.
V
Volunteer Program: The Community Volunteer Income Tax Program (CVITP) that offers free tax preparation services to eligible individuals with modest income and simple tax situations.
W
Withholding Tax: Tax deducted at source from certain types of income, such as employment income, interest, dividends, or pension payments.
Working Income Tax Benefit (WITB): A refundable tax credit that provided tax relief for eligible working low-income individuals and families. It was renamed the Canada Workers Benefit in 2019.
Resources
For further information on Canadian tax terminology and regulations, please visit: