In general, any amount that is earned, whatever its source, constitutes income.
You earned amounts in foreign currency
Amounts earned in foreign currency must be reported in Canadian dollars. To convert amounts earned in a foreign currency, use the exchange rate in effect at the time you earned the amounts. You can use the average exchange rate for the year if the amounts were received over the entire year. For information on the exchange rate, consult the Bank of Canada website.
Do not include the following amounts in your income:
- the allowance received under the shelter allowance program;
- the value of property received as an inheritance;
- amounts received under a life insurance policy further to the death of the insured;
- the child assistance payment from Retraite Québec;
- Canada Child Tax Benefit payments;
- the solidarity tax credit;
- the tax credits respecting the work premium;
- the GST credit;
- lottery winnings (however, if you sell lottery tickets, any amount you receive for having sold a winning ticket must be included in your business income);
- strike pay;
- benefits received under a wage loss replacement plan or an income insurance plan, other than a plan to which your employer made a contribution;
- as a rule, income, gains and losses arising from investments held in a tax-free savings account (TFSA).
Income that you earn from non-taxable amounts, such as interest income on lottery winnings, is taxable.
Retroactive payments and support-payment arrears
If you received a retroactive payment in 2016, you must report it on the appropriate line of the return. If at least $300 of the payment applies to previous years, we can, at your request, determine whether it is to your advantage to average that portion of the payment. If it is, we will calculate the income tax payable on that portion of the payment as if you had received it in the previous years concerned and will deduct it from your taxable income for 2016. We will then enter a tax adjustment on line 443.
We can average the following amounts:
- employment income (line 101 or 107) received further to a court judgment, an arbitration award or a settlement between the parties in legal proceedings;
- wage loss replacement benefits (line 107);
- a retroactive payment that you are required to include on line 110, 111, 114, 119, 122 or 147;
- interest on a retroactive payment (line 130);
- support-payment arrears that you are required to report on line 142;
- a retroactive payment of labour adjustment benefits and income assistance benefits (line 154);
- any other retroactive payment included on line 154 that would, in the opinion of the Minister of Revenue, be an undue additional tax burden if you were to include it in your taxable income for the year;
- a retroactive payment of the Universal Child Care Benefit (line 278);
- earnings loss benefits, supplementary retirements benefits and permanent impairment allowances paid under the Canadian Forces Members and Veterans Re-establishment and Compensation Act (line 101).
If you want us to do the calculation, report the payments on the appropriate line(s) of your return and check box 404. Also complete form TP-766.2-V, Averaging of a Retroactive Payment, Support-Payment Arrears or a Repayment of Support, and enclose it with your return. If you complete Part 4 of the form, check box 405 of your return.
We cannot average your retroactive payments in the following cases:
- You received a payment of an adjustment in compensation under the Pay Equity Act.
- During the year, you received a retroactive payment that you are deducting in the calculation of your taxable income (for example, a retroactive payment of income replacement indemnities or compensation for the loss of financial support).
- You are transferring, to your spouse on December 31, 2016 (This link will open a new window), a portion of a retroactive payment of eligible retirement income. Neither you nor your spouse can have the transferred portion of the retroactive payment averaged.
Transfer of property
In certain cases, if you transferred or loaned property to another person, it is you who must report, in your own return, the income (such as dividends or interest) that the other person earned from the property. Such is the case if you transferred or loaned property to:
- your spouse; or
- a person who was born after December 31, 1998, and who was:
- your nephew or niece, or
- related to you by blood, marriage or adoption.
However, you are not required to report income from property that you transferred to your spouse so that your spouse could contribute to a tax-free savings account (TFSA), provided your spouse's contributions do not exceed the available contribution room.
Split income of a child
You may have to pay a special tax if you were born after December 31, 1998, and:
- your income includes taxable dividends on unlisted shares (including any capital gain deemed to be a taxable dividend further to the sale of shares to a person with whom you are not dealing at arm's length) and other benefits granted to a shareholder with regard to such shares;
- your income includes income from a partnership or trust, if the partnership or trust earned the income from a business providing goods or services to a business carried on by a person related to you;
- your income includes income from a partnership or trust, if the partnership or trust earned the income from a business or by leasing property, and a person related to you:
- was actively engaged in the partnership or trust, or
- held an interest directly in the partnership, or indirectly through another partnership.
Income subject to this special tax may be shown on your RL-15 or RL-16 slip.
You can claim a deduction for this income on line 295 of your income tax return.
For more information, contact us.