7 How do you get from Net Income for Tax Purposes to Taxable Income to Tax Payable?

Gurveer Brar

After determining Net Income for Tax Purposes using the Section 3 ordering rules, Division C deductions are subtracted to get to the Taxable income (note, don’t confuse Division ‘C’ deductions with section 3(c) deductions). Then Marginal rates are applied to the Taxable Income to calculate the Tax Payable before credits. Lastly, credits are deducted to get to the Tax Payable.  This is best illustrated with an example using 2021 marginal rates and tax credits.Ed Note: There is a small typo in the 3(c) RRSP amount below.  The $2,000 should only be deducted once.

Interactive Content (Author: Anthony Au, June 2019)

Interactive Content (Author: Sam Newton, June 2019)

This is a video walkthrough of a tax payable worksheet originally prepared at BCIT (author unknown).  Note, some tax rates and credits used in the video may be slightly outdated but the concepts remain the same.

References and Resources:

  • ITA – 3(a)-(f), 109-114, 117, 118
  • Competency map: 6.3.2

January 2019

All media in this topic is licensed under a CC BY-NC-SA(Attribution NonCommercial ShareAlike) license and owned by the author of the text.

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