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Income Tax Basics

Core Canadian income-tax terms for reported income, tax rates, and the path to taxable income.

Income Tax Basics explains the core calculation language that shows up across the Canadian personal tax system.

Start With The Return Sequence

The main personal return uses a staged path. These terms should be read in order:

StageCRA lineWhat the stage doesStart here
Total income15000Adds included income sources before deduction stagesTotal Income
Net income23600Reduces total income by eligible deduction lines and feeds many benefitsNet Income
Taxable income26000Applies later deductions before tax brackets are usedTaxable Income
Tax ratesFederal and provincial or territorial bracketsExplains the rate on the next dollar and the average rate overallMarginal Tax Rate and Effective Tax Rate

Use this section when the question is about the math and sequence behind the return rather than a specific slip, deduction, credit, or CRA notice.

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What This Section Covers

This section focuses on the sequence that turns income into tax results: total income, net income, taxable income, and the rates that apply after deductions and credits are considered.

It does not try to replace the deduction, credit, benefit, or filing-form sections. Instead, it gives those pages their calculation backbone.

In this section

  • Effective Tax Rate
    The effective tax rate is the average rate paid across taxable income rather than the rate on the next dollar.
  • Marginal Tax Rate
    The marginal tax rate is the rate that applies to the next dollar of taxable income, not the average rate across all income.
  • Net Income
    Net income is the result after eligible deductions reduce total income and before later steps determine taxable income.
  • Taxable Income
    Taxable income is the amount to which tax rates are applied after the required income-calculation steps are completed.
  • Total Income
    Total income is the combined included income from all reported sources before deductions are applied.
Revised on Friday, April 24, 2026