What Counts as Taxable Income?
Wages, tips, side gigs, investments, rent and pensions: what CRA taxes, and the three income lines on your return.
The short version
- If you live in Canada, almost everything you earn is taxable: wages, tips, side-gig money, pensions, EI, interest, dividends, rent, business profit and half of your capital gains.
- Foreign income counts too. A foreign tax credit usually stops you being taxed twice.
- “Taxable income” is also a specific number: line 26000 of your return, after deductions. That's the number the brackets apply to.
- No slip doesn't mean no tax. Cash, e-transfers and app payments are taxable whether or not anybody sends you a slip.
- Gifts, inheritances, lottery wins, TFSA withdrawals and most government benefit cheques are not taxable. See non-taxable income in Canada.
What Counts as Taxable Income in Canada?
CRA's view of your income is a bit like a contractor's view of your basement: if it's there, it's included. The Income Tax Act starts from the position that money coming in is taxable, and then lists the exceptions. The exceptions list is short. This page covers the long list.
Two meanings get mixed up. In everyday talk, “taxable income” means any income you pay tax on. On the return, it's one exact line, 26000, which is what's left after deductions. Both are below.
The Three Numbers on Your Return
| Line | Name | What it is |
|---|---|---|
| 15000 | Total income | Everything taxable, added up. |
| 23600 | Net income | Total income minus deductions such as RRSP and FHSA contributions, child care and union dues. CRA uses this to calculate benefits and the OAS clawback. |
| 26000 | Taxable income | Net income minus a few more items, such as loss carry-forwards. The 2026 tax brackets apply to this number. |
So the way to pay less tax legally is to shrink line 26000 with deductions, then shrink the tax itself with credits. Our guides to Canadian tax deductions and Canadian tax credits list both.
Income That Is Taxable
Employment Income
- Salary, wages, bonuses, vacation pay and overtime, shown in box 14 of your T4 slip (line 10100).
- Taxable benefits from your employer: personal use of a company vehicle, employer-paid group life insurance premiums, cash gifts, gift cards. They're already in box 14, so don't add them twice.
- Tips, including tips paid to you directly by customers. Tips your employer controls are on your T4; tips straight from the customer usually aren't on any slip, and are still taxable.
- Commissions, wage-loss replacement payments, and most other money that comes because of a job.
Self-Employment and Side Income
Net profit from a business, a trade, a profession, freelancing, ride-share driving, delivery apps, online selling or renting out a room. It goes on form T2125, and you pay both halves of CPP on it. A cash job on a Saturday is income. So is the money from the guy who paid you by e-transfer “so we don't have to bother with paperwork.” CRA will bother. More on cash income and taxes and side hustle taxes.
Since 2024, digital platforms such as ride-share, delivery and short-term rental apps report sellers' earnings to CRA every year. Our page on self-employed taxes in Canada covers what to deduct and what to set aside.
Investment Income
- Interest from bank accounts, GICs and bonds (reported on a T5 slip), taxed in full every year, even if it isn't paid out until the GIC matures.
- Dividends from Canadian companies, grossed up (by 38% for eligible dividends, 15% for other dividends) and then reduced by the dividend tax credit.
- Capital gains: half of the gain is taxable. See capital gains tax in Canada.
- Crypto: selling, swapping or spending it can be a capital gain; trading as a business is fully taxable business income.
- Foreign interest and dividends, in Canadian dollars.
Rental Income
Rent minus deductible expenses, on form T776. Renting the basement apartment counts. Our guide to rental property taxes covers the expenses and the CCA traps.
Pensions and Government Payments
- CPP and Old Age Security, employer pensions, RRIF and annuity payments.
- RRSP withdrawals (except Home Buyers' Plan and Lifelong Learning Plan withdrawals, which are loans to yourself).
- Employment Insurance benefits.
- Spousal support received under a written agreement or court order. Child support under agreements made after April 1997 is not taxable.
The “Taxable, But Not Really” Group
Workers' compensation, social assistance and the Guaranteed Income Supplement are added to your income and then deducted again at line 25000. You pay no tax on them, but they raise your net income, which can reduce income-tested benefits. CRA wants to know about them, even though it doesn't tax them. Bureaucracy has its reasons.
Is this particular money taxable?
Describe where it came from in a sentence: a settlement, a gift from your employer, crypto, money from a parent. The assistant tells you if it's taxable, which line it goes on, and the CRA rule behind it.
Things People Forget to Report
- A second T4 from a job you left in March. CRA has a copy, even if you lost yours. Read what to do about a missing T4.
- A T4A for contract work, a scholarship or a pension. See the T4A slip explained.
- GIC interest that accrued but wasn't paid yet.
- Tips and cash jobs, which never come with a slip.
- The sale of a home, which must be reported even when the whole gain is exempt.
CRA's computers match every slip issued in your name against your return. A missed slip means a reassessment with interest, usually in the fall, usually when you've already spent the refund. Fail to report $500 or more in two of four years and there's a separate penalty of up to 10% of the missed amount. Before you file, Return Check compares your slips with your return and flags what's missing.
Residents vs. Non-Residents
Canadian residents pay tax on worldwide income. Non-residents pay Canadian tax only on certain Canadian income, such as wages earned here, Canadian rental income and gains on Canadian real estate. Residency depends on your ties to Canada (home, spouse, dependants), not just your passport. If you're moving in or out of the country, that's worth a professional opinion.
Taxable Income Questions
What is taxable income in Canada?
In everyday terms, any income you pay tax on: employment, self-employment, investment, rental, pension and benefit income, and half of capital gains. On the return, taxable income is line 26000: net income minus a few deductions such as loss carry-forwards. The tax brackets apply to line 26000.
Is cash income taxable in Canada?
Yes. Income is taxable whether it is paid by cheque, e-transfer, an app or cash, and whether or not you receive a slip.
Are tips taxable in Canada?
Yes. Tips controlled by your employer are included on your T4. Tips customers pay you directly are usually not on a slip but are still taxable and must be reported.
Is money from a side hustle taxable?
Yes. Net profit from selling, freelancing, delivery or ride-share work is business income reported on form T2125, and you also pay both halves of CPP on it. Since 2024, digital platforms report sellers' earnings to CRA.
What is the difference between total income, net income and taxable income?
Total income (line 15000) is all taxable income added up. Net income (line 23600) is total income minus deductions such as RRSP contributions. Taxable income (line 26000) is net income minus a few further deductions, and it is what the tax brackets apply to.
Sources: CRA, Federal Income Tax and Benefit Guide; Amounts that are not reported or taxed; False reporting or repeated failure to report income; Line 13000 Other income. Checked October 2026. Residency and foreign income rules are summarized; individual cases vary.
Last reviewed October 4, 2026 against CRA and Government of Canada sources. How we check our facts.