Canada’s tax system doesn’t treat every dollar of income the same way. Where the money comes from decides which slip or form reports it, whether tax is taken off before you receive it, and how much of it counts as taxable income. This page sets the main kinds of income side by side and links the guide that covers each one in full. For how much Canadians earn, by province, profession and percentile, see the income section.
Gross, net and taxable income
Gross income is what you earn before anything is taken off. “Net income” means two different things: take-home pay on a pay stub, and line 23600 of a tax return, which the CRA uses to calculate your non-refundable tax credits and benefits such as the Canada child benefit. What net income means explains both, and how tax brackets work covers the rates applied to taxable income.
Employment income
Wages, salary, commissions and taxable benefits are employment income. Your employer deducts income tax, CPP contributions (QPP in Quebec) and EI premiums from your pay and reports what it paid you for the calendar year on a T4 slip. Your employer contributes an amount equal to the CPP contributions it deducts.
- What comes off each paycheque: how payroll deductions work, or work out take-home pay with the salary after tax calculator.
- Perks that count as pay: what a taxable benefit is.
- Reading the slip: the T4 slip explained.
Self-employment income
If you work for yourself, you report your business or professional income and expenses on Form T2125, and tax applies to the profit rather than to your sales. You pay both the employee and the employer share, calculated on Schedule 8 when you file your income tax return. Self-employed people can register for EI special benefits (maternity, parental, sickness and caregiving), but must wait 12 months after registering before they can claim.
Self-employment income has no tax withheld, so the CRA notes you might have to pay tax by instalments; tax instalments covers who has to pay and when.
- Whether the CRA sees you as an employee or a contractor: contractor vs employee.
- A side business on top of a job: side hustle taxes and the side hustles section.
- Full-time self-employment: the self-employed tax guides.
Investment income
Investment income is taxed in three different ways, depending on its type:
- Interest from savings accounts, GICs and bonds forms part of your total income and is reported on line 12100, usually from a T5 slip. See how GIC interest is taxed.
- Dividends from taxable Canadian corporations can qualify for the federal dividend tax credit, which works differently for eligible and non-eligible dividends: see the dividend tax credit guide.
- Capital gains are only partly taxed: 50% of the gain is added to your income, the share set by the capital gains inclusion rate. Gains and losses are worked out on Schedule 3.
Dividends, capital gains and interest compared works out the tax on each at different incomes. The account matters too: Interest, dividends and capital gains earned in a TFSA are generally tax-free, even when you withdraw them. Income earned in an RRSP is usually exempt from tax as long as the funds remain in the plan, and you generally pay tax when you receive payments from it. The TFSA and RRSP guides cover how each account works.
Rental income
Rent from a property you own is reported on Form T776, Statement of Real Estate Rentals (how to fill it in), where you work out your gross rental income, the expenses you can deduct and your net rental income or loss for the year. How rental income is taxed covers what you can deduct and how losses work.
Government benefits and pensions
Some government payments are taxable income and some aren’t:
- Taxable: the CPP retirement pension, the OAS pension, which also carries a recovery tax at higher incomes, and EI benefits, whatever the type of benefit. Tax is deducted from each EI payment; for CPP and OAS, you can ask Service Canada to deduct it.
- Not taxable: the Guaranteed Income Supplement, which is recalculated each July from your net income for the previous calendar year, and the Canada child benefit.
The government benefits guide lists the federal programs.
The kinds of income side by side
| Kind of income | Reported on | Tax taken off before you’re paid? | How much is taxed | Full guide |
|---|---|---|---|---|
| Employment | T4 slip | Yes: income tax, CPP or QPP, EI | All of it | Payroll deductions |
| Self-employment | Form T2125 | No; instalments may apply | The profit | Self-employed taxes |
| Interest | T5 slip, line 12100 | No | All of it | GIC interest |
| Canadian dividends | T5 or T3 slip | No | The grossed-up amount, with a dividend tax credit against the tax | Dividend tax credit |
| Capital gains | Schedule 3 | No | 50% of the gain | Inclusion rate |
| Rental | Form T776 | No | Net rental income | Rental income tax |
| CPP and OAS pensions | Government slips | Only if you ask | All of it | Is CPP taxable? |
| EI benefits | Government slip | Yes | All of it | EI |
Sources
The figures and rules on this page come from these sources, last checked against them between September 23, 2026 and October 1, 2026. How we check facts.
- Canada Revenue Agency: Capital Gains – 2025
- Canada Revenue Agency: The Canada Pension Plan enhancement
- Canada Revenue Agency: Employers’ Guide – Payroll Deductions and Remittances
- Canada Revenue Agency: Registered Retirement Savings Plan (RRSP)
- Canada Revenue Agency: What is a TFSA
- Government of Canada: Statement of contributions to the Canada Pension Plan
- Government of Canada: EI: Self-employed benefits – Who can qualify