Understanding your total income is crucial when it comes to filing your taxes in Canada. It is important to know what constitutes total income and how it affects your tax obligations. In this article, we will discuss everything you need to know about total income, including its definition, what it includes, and how it is calculated.
What is Total Income?
Total income is the sum of all income you earned throughout the tax year. This includes income from employment, self-employment, investments, rental income, and any other sources of income. It is important to note that total income is not the same as taxable income, which is the amount of income you pay taxes on after deductions and credits.
What Does Total Income Include?
Total income includes all sources of income you received in the tax year, such as:
- Employment income: This includes wages, salaries, bonuses, and tips you earned from your employer.
- Self-employment income: This includes income from any business or profession you are self-employed in.
- Investment income: This includes interest, dividends, and capital gains from investments such as stocks, bonds, and mutual funds.
- Rental income: This includes income you receive from renting out a property you own.
- Other income: This includes any other sources of income not mentioned above, such as spousal support, child support, and social assistance payments.
How is Total Income Calculated?
Total income is calculated by adding up all sources of income you received in the tax year. To calculate total income, you will need to have all your income statements, such as T4 slips, T5 slips, and investment statements. Once you have gathered all your income statements, add up the amounts to determine your total income.
Why is Total Income Important for Tax Filing?
Total income is important for tax filing because it is used to determine your tax bracket and tax rate. Your tax bracket is based on your total income and determines the percentage of tax you owe. The higher your total income, the higher your tax bracket and tax rate. Knowing your total income can help you plan your tax payments and take advantage of any deductions and credits you may be eligible for.
In conclusion, understanding your total income is essential when it comes to filing your taxes in Canada. It includes all sources of income you received in the tax year and is used to determine your tax bracket and tax rate. By knowing your total income, you can plan your tax payments and take advantage of any deductions and credits you may be eligible for.