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Financial Education

Secondary 5 • September 7, 2024

Hello, I need help with some terms in financial education ;)!
First, gross income is the total revenue that a person gains in the entire year that is before taxes right?
Then does taxable income means how much many the government will take from your gross income? But one thing that confuses me is the federal deduction… I don’t really understand these last two terms. Can you please help me to clarify them?
Thank you so much ;) !!!

Answer (1)

Alloprof Answer

September 7, 2024

Good morning AdorableApatosaurus,
Thank you for using our services! :)
Indeed, the term "gross income" refers to the money earned before taxes and other deductions are subtracted.
Then, "taxable income" refers to the income that is subject to tax, which is the "gross income" minus credits and some deductions. It is therefore the amount on which taxes are calculated.
Finally, in Canada, "federal deductions" refer to all amounts that can be deducted from your "gross income," thereby reducing your "taxable income." This includes, among other things, contributions to a "registered retirement savings plan" (RRSP).
I hope these explanations help clarify things for you. Feel free to reach out to us again if you have any more questions! :)
Marilee