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.
Do not include the following in your income:
- the shelter allowance;
- the value of property received as an inheritance;
- amounts received under a life insurance policy further to the death of the insured;
- the family allowance 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) or a first home savings account (FHSA).
Income that you earn from non-taxable amounts, such as interest income on lottery winnings, is taxable.
If you received a retroactive payment in 2023, 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 2023. 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, in the opinion of the Minister of Revenue, would 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 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.
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 part of a retroactive payment of eligible retirement income to your spouse on December 31, 2023. Neither you nor your spouse can have the transferred portion of the retroactive payment averaged.
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, 2005, and who was:
- your niece or nephew, or
- related to you by blood, marriage, civil union 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) or a first home savings account (FHSA), provided his or her contributions do not exceed the available contribution room of either account.
You may have to pay a 25.75% tax (line 443) if you included, in your income, certain types of income (called split income) that you received directly or through a trust or partnership. Income subject to the 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 information on split income and how to report it, see form TP-766.3.4-V, Income Tax on Split Income.
For more information, contact us.