Total Income

In general, any amount that is earned, whatever its source, is income.

You earned amounts in foreign currency

Amounts earned in foreign currency must be reported in Canadian dollars. To convert them, use the exchange rate in effect when you earned them. You can use the average exchange rate for the year if the amounts were received over the entire year. To find out the exchange rate, consult the Bank of Canada website.

Non-taxable amounts

Do not include the following 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).
Note

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 2018, 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 2018. 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 retirement benefits and career impact allowances (formerly “permanent impairment allowances”) paid under the federal Veterans Well-being 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.

Important

We cannot average your retroactive payments in the following cases:

  • You received a compensation adjustment 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, 2018, 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

If you transferred or loaned property to one of the people listed below, you must report the income (such as dividends or interest) that he or she earned from the property.

  • your spouse; or
  • a person who was born after December 31, 2000, 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 he or she could contribute to a tax-free savings account (TFSA), provided his or her contributions do not exceed the available contribution room.

Split income

You may have to pay a special tax (line 443) if you included, in your income, certain types of income (called split income) that you received directly or indirectly from a trust or partnership.

The following types of income (among others) are generally subject to the special tax on split income:

  • a taxable dividend or taxable benefit related to shares not listed on a stock exchange, including any capital gain deemed to be a taxable dividend further to the disposition of shares to a person with whom you are not dealing at arm's length (if you are under 18, the dividend is deemed to be a dividend that is not an eligible dividend);
  • income from a trust or partnership that derived the income from:
    • one or more businesses related to you, or
    • the rental of property, if a person related to you is actively engaged on a regular basis in the activities of the trust or partnership or has an interest in the particular partnership directly or indirectly through another partnership;
  • an amount included in calculating your income for 2018 that is related to a debt obligation of a corporation (other than a mutual fund corporation) whose shares are not listed on a stock exchange, a trust (other than a mutual fund trust) or a partnership, provided the debt obligation is not:
    • related to certain government debts obligations or the debts they guarantee,
    • listed or traded on a public market, or
    • a deposit to your credit with a Canadian branch of a bank or credit union;
  • a taxable capital gain or profit from a disposition (sale, transfer, gift, bequest, etc.) that you carried out after 2017, or that was attributed to you by a trust or partnership that carried out the disposition after 2017, of property that is:
    • a share of the capital stock (other than a share of a class listed on a stock exchange or a share of the capital stock of a mutual fund corporation),
    • an interest as a beneficiary of a trust other than a mutual fund trust or a trust deemed to exist in respect of a congregation,
    • an interest in a partnership,
    • a debt obligation, provided it is not:
      • related to certain government debts obligations or the debts they guarantee,
      • listed or traded on a public market, or
      • a deposit to your credit with a Canadian branch of a bank or credit union.

If the property is not a share of a corporation, one of the following conditions must be met:

  • an amount in respect of the property is included in your split income for 2018 or a previous year;
  • immediately before the disposition of the property after 2017, all or part of the fair market value of the property was directly or indirectly attributable to a share of the capital stock of a corporation not listed on a stock exchange (other than a share in the capital stock of a mutual fund corporation).

Your income subject to the special tax on split income varies depending on which of the following age brackets you fell into on December 31, 2018:

  • under 18 years old;
  • 18 to 24 years old;
  • 25 or older.

Note that you must have been resident in Canada on December 31, 2018 (if you were under 18, your father or mother must have been resident in Canada at some point during the year).

Special rules also apply in respect of certain types of income derived from property such as:

  • inherited property; and
  • property acquired from your spouse as a result of the breakdown of your marriage, civil union or de facto union.

Regardless of your age, the following taxable capital gains are not subject to the special tax on split income:

  • capital gains realized on the deemed disposition of capital property owned by an individual immediately before his or her death; and
  • capital gains on the disposition of property that, at the time of the disposition, was qualified farm or fishing property or qualified small business corporation shares, unless the capital gain is deemed to be a dividend.

Income subject to the special tax may be shown on your RL-15 or RL-16 slip.

You can claim a deduction for split income on line 295 of your income tax return.

For more information, contact us.

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