Tax Deduction

Definition

• An allowable (by government) expense that can be subtracted from income before calculating income tax.

Synonyms
offset, tax aid, Revenue Canada, tax advantage, tax adjustment

Related Terms and Acronyms

• 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.
• 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).
• Circuit Breaker — Definition,
  • A tax credit that reduces property taxes for the elderly and permanently disabled. The credit is dependent on the amount of income earned which means the more you make, the lower the credit.
  • An electrical device used to turn power off and on in sectors of a building and to limit the flow of electricity through a circuit for safety purposes.
• Constructive Receipt — Definition,
  • The idea in which a taxpayer does not actually have to take possession of money for it to be taxable. An example of this is when savings account interest is reinvested rather than sent to the account holder as a separate payment. In this case, the account holder constructively received the interest because the earnings were credited to his account and could have been taken out at the owner's discretion. As such, the earnings are taxable.
• Filing Extension — Definition,
  • An additional amount of time to file your return. A filing extension, however, does not give you more time to pay your taxes.
• Fixed Expenses (FE) — Acronym,
  • Fixed business costs that do not change regardless of business volume, such as property rental, insurance payments, utilities, etc.
• Marital Deduction — Definition,
  • For estate tax and gift tax purposes, a deduction that allows you to transfer assets to your spouse tax-free.
• Meals and Entertainment (M&E) — Acronym,
  • Deductible expenses in your business such as the cost of taking a client to a restaurant (meals) or a sporting event (entertainment). However, these expenses are only partially deductible (50 % in Canada).
• Non-refundable Credit — Definition,
  • Tax credits reduce your tax liability dollar-for-dollar. Non-refundable credits can get your tax bill down to zero.
• Notice of Assessment (NOA) — Acronym, Canada, Important,
  • A form the federal government issues when personal taxes are complete. A notice of assessment shows a breakdown of the given years income along with the balance owing or refund.
  ➥ Canada Revenue Agency's T451 tax form.
• Registered Education Savings Plan (RESP) — Acronym, Canada, Very Important,
  • An investment vehicle used for a child's post-secondary education.
  ➥ RESPs are offered by most financial institutions in Canada.
• Short Tax Year — Definition,
  • A tax period less than 12 months long, resulting from a business start-up or the transition to a tax year ending on a different date.
• Tax Credit (TC) — Acronym, Important,
  • Tax credits are used to reduce the amount of the tax owed. Tax credits are more valuable than deductions because they directly reduce the amount of tax owed, rather than reducing the amount of income that is taxed.