Lesson 4 - taxes fina 200

Accumulated Income Payments (AIPs)

"The taxable amount paid to a subscriber from an RESP."

Average tax rate

"The amount of tax you pay as a percentage of your total taxable income."

Capital assets

"Capital assets"

Capital gain

"Money earned when you sell an asset at a higher price than you paid for it."

Capital loss

"Money lost when you sell an asset at a lower price than you paid for it."

Clawback

"Used to reduce (that is

Deductions

"An item that can be deducted from total income to determine taxable income."

Dividend income

"Income received from corporations in the form of dividends paid on stock or on mutual funds that hold stock. Dividend income represents the profit due to part owners of the company."

Educational Assistance Payments (EAPs)

"The taxable amount paid to a beneficiary from an RESP."

Excise taxes

"Special taxes levied on certain consumer products such as cigarettes

Interest income

"Interest earned from investments in various types of savings accounts at financial institutions; from investments in debt securities such as term deposits

Marginal tax rate

"The percentage of tax you pay on your next dollar of taxable income."

Net income

"The amount remaining after subtracting deductions from your total income."

Non-refundable tax credit

"The portion of the credit that is not needed to reduce your tax liability will not be paid to you and cannot be carried forward to reduce your tax liability in the future."

Personal income taxes

"Taxes imposed on income earned."

Refundable tax credit

"The portion of the credit that is not needed to reduce your tax liability (because it is already zero) may be paid to you."

Registered Education Savings Plans (RESPs)

"A special savings account for parents who want to save for their child's education after high school."

Registered Retirement Savings Plans (RRSPs)

"A type of private pension that enables you to save for your retirement on a tax-deferred basis."

Tax avoidance

"Occurs when taxpayers legally apply tax law to reduce or eliminate taxes payable in ways that the CRA considers potentially abusive of the spirit of the Income Tax Act."

Tax evasion

"Occurs when taxpayers attempt to deceive the CRA by knowingly reporting less tax payable than what the law obligates them to pay."

Tax planning

"Involves activities and transactions that reduce or eliminate tax."

Tax-Free Savings Accounts (TSFAs)

"A registered investment account that allows you to purchase investments

Total income

"All reportable income from any source