Terms with Category Taxation
- Accrual Method — Definition,
- Business accounting in which you report income in the year you earned it and expenses in the year you incur them, rather than reporting income and expenses when you receive payment or when you pay the expenses. Under this method, if you built a deck and billed the client in December 1999, the amount you charged would be reported in 1999 as income even if you didn't get the payment until January 2000. If you own a business that maintains an inventory, you are required to use the accrual method.
- Active Income — Definition,
- Active income refers to wages, tips, and profits from your business or employment that you partake in. It also includes portfolio income such as interest and dividends, but you cannot usually offset active income with passive losses.
- Alimony — Definition,
- Monthly payments received by an ex-spouse. Payments must be received continuously for one year to be counted toward qualifying income for a loan.
- Alternative Minimum Tax (AMT) — Acronym,
- This tax primarily affects high-income taxpayers who shelter some of their income from tax through certain tax preference items or deductions. It is often referred to in tax publications as AMT and, if your income meets the limit, you have to recalculate your tax due based on the separate alternative minimum tax rates and tables.
➥ Form T691. - Annual Mortgage Statement — Definition, Important,
- A report sent to the borrower every year, detailing how much principal remains on the home loan and how much was paid in taxes and interest during the previous year.
- Assessed Value (ast, AV) — Acronym & Abbreviation,
- A municipal or provincial government's determination of a property's worth for tax purposes.
- Assessment Rolls — Definition,
- Lists of taxable property.
- Assessments — Definition,
- Special and local taxes imposed upon property which benefits from an improvement that has been made in the vicinity.
- Audit — Definition,
- An examination of a taxpayer's income tax return or other transactions bearing tax consequences. Audits range from a simple letter from the agency to a detailed review of individual or business tax filings and records.
- Average Tax Rate — Definition,
- The real rate of taxes you pay after taking into account the various federal tax brackets. There are different tax rates for different levels of income; you pay lower rates on the first part of your income, more on the later earnings. As you pass each income level, the money above that level is taxed at the next higher rate. Therefore, your average tax rate is less than the top rate you pay on a portion of income.
- Bad Debt — Definition,
- Money that cannot be collected is considered bad debt. Businesses can deduct bad debts under certain circumstances. If a bad debt is personal, it can also be deducted in some instances as a short-term capital loss.
- Basis — Definition,
- Relating to cost basis, this is the amount assigned to an asset from which a taxpayer determines capital gain or loss. For assets purchased, the basis is the price paid. Special rules apply to assets acquired through gift or inheritance, as well as to the value of stock funds held for a period during which earnings are reinvested.
- That on which a thing rests or is founded.
- Before-tax Income — Definition,
- Earnings before income taxes are paid.
- Business Interest Expense — Definition,
- Interest acquired in business operations can be deducted as a business expense.
- Canada Pension Plan (CPP) — Acronym, Canada, Important,
- A public pension plan administrated by the Canadian government.
- Capital Assets — Definition,
- Items that you own for investment or personal purposes, such as stocks, bonds or stamp collections. When you sell a capital asset, depending on the price you earn a capital gain or a capital loss. Gains are taxed at a special rate, and losses can be used in many cases to reduce the amount that is taxed. See also "Capital Gain" or "Capital Loss."
- Capital Cost Allowance (CCA) — Acronym, Canada,
- Capital Cost Allowance is a method of expensing depreciable assets as defined by the Canadian Income Tax Act (ITA).
- Capital Gain (CG) — Acronym, Important,
- The profit made by the seller when real estate or other capital assets are sold. Capital gains are taxed more favourably than earned income. However, this can be dependent on your tax bracket and the length of time you owned the asset before it was sold. You could pay approximately one-third to one-half less tax than you would pay on the same amount of earned salary.
- Capital Gain Distribution — Definition,
- When the fund sells some of its assets, you receive capital gain distributions or a portion from the sale. This distribution is regarded as a capital gain, not as ordinary dividends such as the interest gained from a bank account. It is important to separate capital gain distributions from ordinary dividends because capital gains are taxed more favourably.
- Capital Gains Tax (CGT) — Acronym, Canada,
- A tax on profits from the sale of real estate or investments.
- Capital Loss — Definition,
- When an asset is sold for less than what you paid, or less than its adjusted basis, it is a capital loss. However, when it comes to taxes a capital loss is not always bad because you can use it to reduce the amount of income being taxed by the amount of the loss, up to $3,000 per year. If your loss is more significant, the excess (or capital loss carryover) can be carried forward indefinitely until the total loss is used.
- Capitalization — Definition,
- An estimate of the value of a rental or commercial property using the rate of return on investment and the property's annual net operating income.
- Carrying Costs — Definition,
- The cost of maintaining a property.
- Cash Flow — Definition,
- The money an investment produces after subtracting cash expenses from income.
- Cash Flow Forecast — Definition,
- An estimate of when and how much money will be received and paid out of a business. It usually records cash flow on a month-by-month basis for a period of two years.
- Cash Method — Definition,
- The form of accounting in which you report income in the actual year you receive it and deduct expenses in the year you pay. Most individuals use this method. Under this system, if you built a deck and billed the client in December 1999 but didn't receive the cheque until January 2000, it would be counted as 2000 income, not 1999.
- Casualty and Theft Loss — Definition,
- A loss caused by a hurricane, earthquake, fire, flood, theft or similar event that is sudden, unexpected or unusual. You can deduct a portion of personal casualty or theft losses as an itemized deduction.
- Charitable Gift Annuity (CGA) — Acronym, Canada, Very Important,
- A method to facilitate charitable giving whereby an individual transfers assets to a charity in exchange for a tax deduction and lifetime retirement income payments from the charity.
➥ A form of planned giving. - Child Support (CS) — Acronym,
- Monthly payments that contribute to the care of a child. Payments must be received continuously for one year to be counted toward qualifying income for a loan.
- Child Tax Credit (CTC) — Acronym,
- A tax break for those who claim eligible dependent children on their tax returns.
➥ See Canada Child Tax Benefit (CCTB).
