Podcast
Questions and Answers
Which of the following best describes the primary purpose of deductions in the context of income tax?
Which of the following best describes the primary purpose of deductions in the context of income tax?
- To determine eligibility for government benefits.
- To complicate the tax filing process.
- To increase the amount of tax you pay.
- To reduce the amount of tax you may have to pay. (correct)
Net income is calculated by subtracting deductions from taxable income.
Net income is calculated by subtracting deductions from taxable income.
False (B)
What does the Canada Revenue Agency (CRA) use your net income to calculate?
What does the Canada Revenue Agency (CRA) use your net income to calculate?
Benefits and credits eligibility
Your ____________ income is used to determine how much federal and provincial/territorial tax you owe.
Your ____________ income is used to determine how much federal and provincial/territorial tax you owe.
Which of the following scenarios demonstrates a valid deduction?
Which of the following scenarios demonstrates a valid deduction?
An RPP is a savings plan that individuals set up on their own.
An RPP is a savings plan that individuals set up on their own.
On which slip is the total amount of Registered Pension Plan (RPP) contributions typically shown?
On which slip is the total amount of Registered Pension Plan (RPP) contributions typically shown?
Your financial institution reports the amount of your RRSP contributions on a contribution ___________.
Your financial institution reports the amount of your RRSP contributions on a contribution ___________.
Where can you find your RRSP deduction limit?
Where can you find your RRSP deduction limit?
There is a minimum age requirement to contribute to an RRSP.
There is a minimum age requirement to contribute to an RRSP.
Until what age can you generally contribute to your RRSP?
Until what age can you generally contribute to your RRSP?
Union dues are shown in box 44 of a ___________ slip.
Union dues are shown in box 44 of a ___________ slip.
Which of the following activities qualifies you to claim child care expenses?
Which of the following activities qualifies you to claim child care expenses?
Child care expenses can be claimed for a child who is 17 years old, regardless of their mental capacity.
Child care expenses can be claimed for a child who is 17 years old, regardless of their mental capacity.
Child care expenses are calculated on a Form __________.
Child care expenses are calculated on a Form __________.
Match the following deductions with their corresponding descriptions:
Match the following deductions with their corresponding descriptions:
Why is taxable income used to determine how much federal and provincial/territorial income tax you owe?
Why is taxable income used to determine how much federal and provincial/territorial income tax you owe?
Deductible RRSP contributions cannot be used to reduce your income tax.
Deductible RRSP contributions cannot be used to reduce your income tax.
When is your RRSP contribution receipt usually issued?
When is your RRSP contribution receipt usually issued?
Child care expenses are amounts you pay for someone to look after an eligible child so you can do certain activities, such as working, running a business, or attending ___________.
Child care expenses are amounts you pay for someone to look after an eligible child so you can do certain activities, such as working, running a business, or attending ___________.
Flashcards
Deductions
Deductions
Expenses subtracted from total income to reduce the amount of tax you pay.
Net Income
Net Income
Total Income minus Deductions.
Taxable Income
Taxable Income
Net Income minus further Deductions.
Registered Pension Plan (RPP)
Registered Pension Plan (RPP)
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Registered Retirement Savings Plan (RRSP)
Registered Retirement Savings Plan (RRSP)
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Union Dues
Union Dues
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Child Care Expenses
Child Care Expenses
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Study Notes
- Deductions are expenses subtracted from total or net income on an income tax return, reducing the amount of tax payable.
- Some deductions reduce net income, while others reduce taxable income.
Net Income Calculation (Step 3):
- Total Income – Deductions = Net Income
Taxable Income Calculation (Step 4):
- Net Income – Deductions = Taxable Income
- The CRA uses net income to calculate eligibility for benefits and credits like the Canada Child Benefit or GST/HST credit.
- Taxable income determines federal and provincial/territorial tax owed.
- Example: Earning $22,000 with $300 in union dues allows deducting the dues, reducing net income to $21,700.
Common Types of Deductions
- Deduction types include Registered Pension Plan (RPP) contributions, Registered Retirement Savings Plan (RRSP) contributions, union dues, and child care expenses.
Registered Pension Plan (RPP) Contributions
- An RPP is a pension plan set up by an employer and registered with the CRA, designed to provide retirement income.
- RPP contributions are usually deducted from paychecks and appear in box 20 of the T4 slip or box 32 of a T4A slip.
Registered Retirement Savings Plan (RRSP) Contributions
- An RRSP is a retirement savings and investment plan individuals can contribute to, with deductible contributions reducing income tax.
- Financial institutions report contribution amounts on a contribution receipt, typically issued in March of the following tax year.
- Deduction limits can be found on My Account or the latest notice of assessment.
- There's no minimum age to contribute to an RRSP; contributions can be made until December 31 of the year one turns 71, provided there's available deduction room.
Union Dues
- Union dues are contributions made by members to fund union activities.
- Employers usually deduct union dues from paychecks, with the total amount shown in box 44 of a T4 slip or on other receipts.
Child Care Expenses
- Child care expenses are payments for someone to look after a child, enabling activities like working, running a business, or attending school.
- Eligible children must be under 16, or of any age if they have a physical or mental impairment and are dependent.
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