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Your net income is the number on line 23600 of your tax return: total income (line 15000) minus the deductions on lines 20700 to 23500. It is not your take-home pay. It’s the figure the CRA uses to size your credits and to test if you qualify for benefits like the Canada child benefit, so it often matters more than the tax bill itself.
How is net income worked out on the return?
Start with total income, which is everything you report: employment pay, business income, investment income, the taxable part of capital gains. Then subtract the deductions listed between lines 20700 and 23500. What’s left is net income. Subtract a few more deductions that only apply at the bottom of the return and you get taxable income on line 26000, which is what the tax rates are applied to.
For most employees the two numbers are close. The big difference in our tests is the extra slice of CPP added a few years ago. Our calculator deducts about 1% of pay above $3,500, which is why $70,000 of Ontario employment income turns into a net income of $69,335. The CPP data file behind that says the base rate is 4.95% and the total is 5.95% for 2026, and the extra 1% is that added slice.
What decides how much your net income moves?
Only deductions. Credits never change it. A tuition credit or the basic personal amount lowers the tax, but line 23600 stays put.
| Item | Effect on line 23600 |
|---|---|
| More employment or business income | Raises it |
| Taxable part of a capital gain | Raises it |
| A deduction such as an RRSP contribution | Lowers it |
| The extra 1% of CPP on your pay | Lowers it |
| A non-refundable credit | No change |
That’s why a deduction can be worth more than you’d think.
It cuts your tax, and it may also pull net income under the line where a benefit starts to shrink.
Is net income the same as net pay?
No, and the mix-up is common. Net pay is what hits your account after your employer takes off tax, CPP and EI. Net income is a line on the return, worked out from your total income before the tax is calculated. Take the $70,000 example below: net income is $69,335, but the amount you keep after income tax, CPP and EI is $53,786.26. They answer different questions. One says how much tax you owe and what you qualify for. The other says what you can spend.
Where does the CRA use your net income?
According to the CRA’s line 23600 page, your net income, and your spouse’s or common-law partner’s, is used to work out the Canada child benefit, the GST/HST credit, the social benefits repayment and some other credits. It also feeds your federal and provincial non-refundable credits. Try the Canada child benefit calculator or the GST/HST credit calculator to see how a drop in net income shows up there.
So should you care about it at tax time? If you get any of those benefits, yes.
A lower net income can raise a payment that arrives all year. If you don’t get any, taxable income is the number that sets your tax.
What does a $5,000 RRSP deduction do to net income?
Take $70,000 of employment income in Ontario for 2026. With no other deductions, our engine gives net income of $69,335, income tax of $11,133.91 and CPP and EI of $5,079.82. You’d keep $53,786.26.
Now deduct $5,000 for an RRSP. Net income falls to $64,335 and income tax to $9,651.41, a saving of $1,482.50. Your cash after tax, RRSP money included as spent, is $50,268.77, because the $5,000 left your pay and went into the plan. The RRSP tax savings calculator shows the same move for your own pay, and the income tax calculator lets you add any other deductions.
Put another way, the $5,000 only cost you about $3,517.50 in take-home terms, because $1,482.50 came back in lower tax. That’s the whole appeal of a deduction, and it’s why people squeeze in a contribution before the deadline.
What if net income comes out negative?
The CRA says to enter 0 on the return if the math gives a negative figure. Keep a note of the real negative number, though, since the CRA may use it for the refundable medical expense supplement or the Canada workers benefit. You may also have a non-capital loss, and Form T1A is how you ask to carry it back to earlier years.
What this page is based on
The definition and uses come from the CRA‘s page for line 23600. The example amounts come from our calculator engine, which uses the 2026 CPP rates and the 2026 federal and Ontario tax data. The engine leaves out credits beyond the basic ones and benefits, and it doesn’t model every deduction on the return. We haven’t seen the dates for the 2026 return yet, so check the CRA’s important dates page for those.
Frequently asked questions
Is net income the same as take-home pay?
No. Net income on line 23600 is total income minus deductions. Take-home pay is what reaches your bank account after tax, CPP and EI.
Is net income the same as taxable income?
Not always. Taxable income on line 26000 is net income reduced by a further set of deductions.
Do tax credits lower net income?
No. Credits reduce your tax. Only deductions lower line 23600.
What benefits depend on net income?
The CRA lists the Canada child benefit, the GST/HST credit and the social benefits repayment, among other credits.
What do I enter if my net income is negative?
Enter 0 on the return, and keep the negative figure. The CRA says it may be used for the refundable medical expense supplement or the Canada workers benefit.
- How Canadian income tax works: brackets and credits
How federal and provincial Canadian income tax stack up, what marginal and average rates mean, and how credits and deductions change your bill