# Canadian tax glossary: plain-English definitions

> Plain-English glossary of about 100 Canadian tax terms, from ACB and AMT to T4 and TFSA, each with a short definition and a link to the page that explains it.

Tax language sounds harder than it is. Here are the terms you'll meet most often, in short sentences, each with a link to the page that explains it properly.

The glossary is for the moment a word stops you. You're reading a CRA letter and it says notice of assessment, or a friend mentions their marginal rate, or a form asks for your taxable income and you aren't sure how that differs from your salary. Most of these words describe simple ideas wrapped in formal wording, and once you've seen them explained plainly a few times, the forms start to read normally.

The entries are short on purpose, usually two sentences. Where a term deserves more than that, the link takes you to a calculator, an article or a guide that goes into it with examples. A few pairs are worth learning first, because people mix them up all the time: deduction and credit, marginal rate and average rate, GST/HST and PST. Get those straight and a lot of tax talk becomes easy to follow.

Think of this page as a pocket dictionary rather than a lesson. If you'd like the whole picture, the guides take a topic from the beginning.

## Most read right now

- [Tax credits in Canada](https://tax-services.ca/articles/tax-credits)A credit cuts your bill by 14% federally, while a deduction saves your top rate.

- [Personal tax deductions in Canada](https://tax-services.ca/articles/personal-tax-deductions-canada)Deductions cut income before tax is worked out; a $5,000 RRSP deduction saves $1,482 on $80,000 of pay in Ontario.

- [Taxable income formula](https://tax-services.ca/articles/taxable-income-formula)From total income to line 26000, with a $70,000 Ontario example.

- [Tax assessment: how to read your notice of assessment](https://tax-services.ca/articles/tax-assessment)Where to find it, what to check and the 90 days you have to dispute it.

- [T4 Canada: what each box means](https://tax-services.ca/articles/t4-canada)Pay in box 14, tax withheld in box 22, and what to do if the slip is late or wrong.

## Which terms come up most?

- [Basic personal amount](https://tax-services.ca/tax-numbers)The amount of income you can earn before federal income tax applies, claimed as a credit. Each province has its own.

- [Capital gain](https://tax-services.ca/calculators/income-tax/capital-gains-tax)The profit when you sell an investment or property for more than it cost. Half of it is added to your income.

- [CPP](https://tax-services.ca/cpp)The Canada Pension Plan. You pay in while you work and receive a pension later. Quebec has its own plan, the QPP.

- [Deduction](https://tax-services.ca/guides/how-canadian-taxes-work)An amount that lowers your taxable income, such as an RRSP contribution. It is different from a credit.

- [Credit](https://tax-services.ca/calculators/income-tax/tax-credits)An amount that lowers the tax you owe, not your income. Most credits in Canada are worth a fixed percentage of the amount claimed.

- [EI](https://tax-services.ca/calculators/family-benefits/ei-calculator)Employment Insurance. Workers pay premiums and may receive benefits if they lose a job or take leave.

- [FHSA](https://tax-services.ca/tax-numbers)The First Home Savings Account. You deduct your contributions and withdraw the money tax-free to buy a first home.

- [GST/HST](https://tax-services.ca/gst)The federal 5% goods and services tax, and the harmonized tax some provinces collect together with it.

- [Instalments](https://tax-services.ca/calculators/income-tax/tax-installments)Payments of tax you make during the year when nothing, or too little, is taken off at the source.

- [Marginal tax rate](https://tax-services.ca/income-tax/tax-brackets)The rate on your next dollar of income. It is higher than your average rate.

- [Notice of assessment](https://tax-services.ca/guides/dealing-with-cra)The CRA letter that tells you what it made of your return, with your RRSP room and any balance.

- [PST](https://tax-services.ca/guides/gst-hst-pst)A provincial sales tax charged separately from the GST in some provinces.

- [RRSP](https://tax-services.ca/rrsp)A Registered Retirement Savings Plan. Contributions are deductible and the growth is not taxed until you withdraw.

- [T4](https://tax-services.ca/guides/file-your-taxes)The slip your employer sends you showing your pay and what was taken off.

- [Taxable income](https://tax-services.ca/income-tax)Your income after deductions. Tax brackets apply to this figure.

- [TFSA](https://tax-services.ca/calculators/rrsp-retirement/tfsa-calculator)A Tax-Free Savings Account. Contributions are not deductible, but the growth and the withdrawals are tax-free.

- [Withholding](https://tax-services.ca/calculators/payroll-salary/take-home-pay-calculator)Tax your employer or payer takes off before you receive the money and sends to the CRA.

- [ACB (adjusted cost base)](https://tax-services.ca/calculators/income-tax/capital-gains-tax)What you paid for an investment or property, plus certain costs like commissions. Your capital gain is the sale price minus the ACB.

- [Adjusted family net income](https://tax-services.ca/calculators/family-benefits/canada-child-benefit)The family income figure the CRA uses for the Canada Child Benefit and similar payments. It is your net income plus your spouse or partner's, with a few adjustments.

- [Age amount](https://tax-services.ca/calculators/income-tax/tax-credits)A credit for people aged 65 and over. It shrinks as your income goes up.

- [Alternative minimum tax (AMT)](https://tax-services.ca/articles/alternative-minimum-tax-canada)A second tax calculation that makes sure people with high incomes and a lot of deductions still pay a minimum amount. You pay whichever result is higher.

- [Attribution rules](https://tax-services.ca/are-gifts-taxable-canada)Rules that send income from money you gave to your spouse or a minor child back to you for tax purposes.

- [Audit](https://tax-services.ca/guides/dealing-with-cra)A close look by the CRA at your books and records. A review is lighter, and usually asks for a few documents.

- [Benefit year](https://tax-services.ca/canada-child-benefit-payment-dates)The July to June period for which benefits like the CCB and the Groceries and Essentials Benefit are worked out from your tax return for the year before.

- [Business number (BN)](https://tax-services.ca/guides/self-employed-and-small-business)A nine digit number the CRA gives a business. Program accounts, such as the GST/HST account and the payroll account, are added to it.

- [Canada Child Benefit (CCB)](https://tax-services.ca/calculators/family-benefits/canada-child-benefit)A tax-free monthly payment for families with children under 18. The amount depends on family income and the children's ages.

- [Canada employment amount](https://tax-services.ca/calculators/income-tax/tax-credits)A small federal credit for people who earn employment income, meant to help with work costs like supplies.

- [Canada Groceries and Essentials Benefit](https://tax-services.ca/canada-groceries-essentials-benefit-payment-dates)The quarterly payment for lower and modest income people that replaced the GST/HST credit in July 2026.

- [Canada Workers Benefit](https://tax-services.ca/articles/eitc)A refundable credit for people with low working income, paid out when you file your return.

- [Capital cost allowance (CCA)](https://tax-services.ca/guides/self-employed-and-small-business)The tax version of depreciation. A business deducts part of the cost of equipment or a vehicle over several years.

- [Capital loss](https://tax-services.ca/calculators/income-tax/capital-gains-tax)What you lose when you sell an investment or property for less than its ACB. It can reduce capital gains in the same year, the three years before or any year after.

- [Carryforward](https://tax-services.ca/life-events/student)An unused amount that you move to a later year, such as tuition credits, capital losses or RRSP room.

- [CESG (Canada Education Savings Grant)](https://tax-services.ca/calculators/rrsp-retirement/resp-cesg)Money the federal government adds to an RESP when you contribute for a child.

- [Common-law partner](https://tax-services.ca/life-events/getting-married)Someone you live with in a relationship, usually after 12 months together, or sooner if you have a child together. The CRA treats you like a married couple for many credits and benefits.

- [CPP2 (second CPP contribution)](https://tax-services.ca/tax-numbers)An extra CPP contribution on earnings above the first ceiling and up to a second, higher ceiling. In 2026 the rate is 4% on earnings between $74,600 and $85,000.

- [CRA My Account](https://tax-services.ca/guides/dealing-with-cra)The secure online account where you see your slips, notice of assessment, benefit payments and RRSP room.

- [Deemed disposition](https://tax-services.ca/calculators/income-tax/capital-gains-tax)A rule that treats you as if you sold property at its fair market value, for example at death or when you leave Canada, even if no sale happens.

- [Disability tax credit (DTC)](https://tax-services.ca/calculators/family-benefits/disability-tax-credit)A credit for people with a severe and prolonged impairment. The CRA has to approve it first, using a form completed by a medical practitioner.

- [Dividend tax credit](https://tax-services.ca/calculators/income-tax/dividend-tax)A credit that offsets part of the tax on dividends from Canadian corporations. The dividend is first grossed up, then the credit is applied.

- [Earned income](https://tax-services.ca/calculators/rrsp-retirement/rrsp-calculator)Income from work, such as employment pay and net self-employment income. It is the base for working out your RRSP room.

- [Eligible and non-eligible dividends](https://tax-services.ca/calculators/income-tax/dividend-tax)Two kinds of Canadian dividends taxed with different gross-ups and credits. Eligible dividends usually come from corporations that paid regular corporate tax.

- [Excess contribution](https://tax-services.ca/is-tfsa-withdrawal-taxable)Putting more into a TFSA or RRSP than your room allows. The CRA charges a penalty of 1% a month on the extra amount, with a small buffer for RRSPs.

- [Fair market value (FMV)](https://tax-services.ca/calculators/income-tax/capital-gains-tax)The price a willing buyer would pay a willing seller. The CRA uses it when you give property away or are treated as selling it.

- [Fiscal year](https://tax-services.ca/gst-hst-filing-frequency)A business's 12 month accounting period. For most individuals the tax year is the calendar year.

- [GIS (Guaranteed Income Supplement)](https://tax-services.ca/calculators/rrsp-retirement/oas-calculator)A monthly payment on top of Old Age Security for seniors with a lower income. It is not taxable.

- [Gross pay](https://tax-services.ca/take-home-pay-by-province)Your pay before tax, CPP, EI and any other deductions.

- [Gross-up](https://tax-services.ca/calculators/income-tax/dividend-tax)Adding an extra amount to a dividend before working out tax on it. A credit later takes the tax back down.

- [HBP (Home Buyers' Plan)](https://tax-services.ca/fhsa-vs-rrsp-canada)A program that lets first-time buyers take money out of an RRSP to buy a home without tax at the time, and pay it back over several years.

- [Information slip](https://tax-services.ca/tax-slips-decoder)Any T-slip or similar form sent to you and to the CRA, such as a T4 or a T5, showing income you must report.

- [Input tax credit (ITC)](https://tax-services.ca/gst-hst-filing-frequency)A way for a GST/HST registered business to get back the GST/HST it paid on costs it used to earn income.

- [Interest on arrears](https://tax-services.ca/missed-tax-filing-deadline)Interest the CRA charges on a balance you owe after the due date. It compounds daily.

- [Lifetime capital gains exemption (LCGE)](https://tax-services.ca/calculators/income-tax/capital-gains-tax)A limit on the gain you can claim tax-free when you sell qualifying small business shares or farm and fishing property. It is about $1,275,000 for 2026.

- [Medical expense tax credit](https://tax-services.ca/calculators/income-tax/tax-credits)A credit for eligible medical costs above a small share of your income. You can pick any 12 month period that ends in the tax year.

- [Net income](https://tax-services.ca/articles/net-income-canada)On your tax return, your total income minus certain deductions like RRSP contributions. It is different from the net pay you take home.

- [Net pay](https://tax-services.ca/take-home-pay-by-province)What lands in your bank account after tax, CPP, EI and other deductions come off your gross pay.

- [Non-refundable credit](https://tax-services.ca/calculators/income-tax/tax-credits)A credit that can cut your tax to zero but will not pay you cash beyond that. Most personal credits work this way.

- [Non-resident](https://tax-services.ca/articles/non-resident-canada)A person who lives outside Canada for tax purposes. The rules depend on your ties to Canada, not only on where you are on a given day.

- [OAS (Old Age Security)](https://tax-services.ca/calculators/rrsp-retirement/oas-calculator)A monthly pension for people 65 and over, based on how long you have lived in Canada after age 18.

- [OAS recovery tax (clawback)](https://tax-services.ca/calculators/rrsp-retirement/oas-calculator)A repayment of part of your OAS when your net income is above a set level. It is taken from your payments.

- [Pay period](https://tax-services.ca/take-home-pay-by-province)How often you are paid: weekly, every two weeks, twice a month or monthly. Your net pay per cheque depends on how many periods you have in a year.

- [Principal residence exemption](https://tax-services.ca/is-it-taxable)A rule that makes the gain on selling your main home tax-free if it qualifies. You still have to report the sale on your return.

- [Progressive tax](https://tax-services.ca/canada-tax-brackets)A system where higher slices of income are taxed at higher rates, so people with higher incomes pay a larger share.

- [QPIP (Quebec Parental Insurance Plan)](https://tax-services.ca/quebec-taxes)Quebec's program that pays maternity, paternity, parental and adoption benefits. Workers in Quebec pay premiums for it, and pay less EI.

- [QPP (Quebec Pension Plan)](https://tax-services.ca/quebec-taxes)Quebec's own pension plan, which works like the CPP for people who work in Quebec.

- [QST (Quebec sales tax)](https://tax-services.ca/sales-tax-by-province)Quebec's provincial sales tax of 9.975%, charged together with the 5% GST.

- [Refundable credit](https://tax-services.ca/calculators/income-tax/tax-credits)A credit that is paid to you even when you owe no tax, as long as you qualify.

- [Record of employment (ROE)](https://tax-services.ca/calculators/family-benefits/ei-calculator)The form your employer files when you stop working or have reduced pay. Service Canada uses it to work out EI benefits.

- [RESP (Registered Education Savings Plan)](https://tax-services.ca/calculators/rrsp-retirement/resp-cesg)A savings plan for a child's education. Growth is not taxed until it is paid out, and government grants can be added.

- [RRIF (Registered Retirement Income Fund)](https://tax-services.ca/calculators/rrsp-retirement/retirement-calculator)The account an RRSP usually turns into by the end of the year you turn 71. You must take a minimum amount out each year, and it is taxable.

- [RRSP deadline](https://tax-services.ca/tax-calendar-2027)The last day to make an RRSP contribution that counts for the previous tax year. It is 60 days after the year ends, which is March 1 in 2027.

- [RRSP deduction limit](https://tax-services.ca/calculators/rrsp-retirement/rrsp-calculator)The amount you can deduct for RRSP contributions this year. It is 18% of last year's earned income, up to a dollar cap, plus unused room, minus pension adjustments.

- [SIN (Social Insurance Number)](https://tax-services.ca/first-time-tax-return-canada)A nine digit number you need to work in Canada and to file taxes. Keep it private.

- [Source deductions](https://tax-services.ca/calculators/business-tax/payroll-remittance)Income tax, CPP and EI that an employer holds back from pay and sends to the CRA.

- [Spousal RRSP](https://tax-services.ca/calculators/rrsp-retirement/rrsp-calculator)An RRSP you contribute to for your spouse or common-law partner. You get the deduction, and they own the money, with rules on early withdrawals.

- [Surtax](https://tax-services.ca/provinces/ontario)An extra tax added on top of provincial tax once it passes a set level. Ontario has one.

- [T1 (income tax and benefit return)](https://tax-services.ca/first-time-tax-return-canada)The personal tax return that individuals file every year.

- [T2 (corporation return)](https://tax-services.ca/calculators/business-tax/corporate-tax-calculator)The tax return a corporation files each year.

- [T2202](https://tax-services.ca/life-events/student)The tuition certificate your school sends you. It supports your tuition credit.

- [T3](https://tax-services.ca/tax-slips-decoder)A slip for income from a trust, which includes many mutual funds and ETFs held outside a registered plan.

- [T4A](https://tax-services.ca/tax-slips-decoder)A slip for pension, retirement, scholarship and other income that is not regular employment pay.

- [T5](https://tax-services.ca/tax-slips-decoder)A slip for interest, dividends and other investment income.

- [T5008](https://tax-services.ca/tax-slips-decoder)A slip for securities you sold or transferred. Use it to work out capital gains and losses.

- [Tax bracket](https://tax-services.ca/canada-tax-brackets)A range of taxable income taxed at one rate. Each part of your income is taxed at the rate for the bracket it falls in.

- [Tax year](https://tax-services.ca/tax-calendar-2027)The 12 months your return covers. For individuals it is the calendar year, January 1 to December 31.

- [Tax-loss selling](https://tax-services.ca/year-end-tax-planning-canada)Selling an investment at a loss so the capital loss offsets capital gains. The sale has to settle before the year ends to count.

- [Taxable benefit](https://tax-services.ca/is-it-taxable)A perk from your employer, such as a company car for personal use, that is added to your income for tax.

- [Taxpayer relief](https://tax-services.ca/missed-tax-filing-deadline)A way to ask the CRA to cancel or reduce penalties and interest when something outside your control stopped you from filing or paying on time.

- [TD1](https://tax-services.ca/articles/td1-quebec)The form that tells your employer which credits to count when they work out how much tax to hold back from your pay.

- [Tuition credit](https://tax-services.ca/life-events/student)A credit for tuition paid to a qualifying school. Unused amounts can be carried forward or, in part, transferred.

- [Voluntary disclosures program](https://tax-services.ca/blog/what-is-a-voluntary-disclosure-program-in-canada)A CRA program that lets you correct a return or report missed income before the CRA contacts you, which may reduce penalties.

- [YMPE and YAMPE](https://tax-services.ca/tax-numbers)The yearly maximum pensionable earnings and the additional maximum, the two ceilings for CPP contributions. For 2026 they are $74,600 and $85,000.

- [Zero-rated supplies](https://tax-services.ca/guides/gst-hst-pst)Goods and services taxed at 0% for GST/HST, such as basic groceries. The seller can still claim input tax credits, unlike with exempt supplies.

- [Zone A (northern residents deduction)](https://tax-services.ca/provinces/yukon)The category for the most remote northern places, where residents can claim a daily deduction. All of Yukon, the Northwest Territories and Nunavut are in it.

## Which pairs of terms get mixed up?

Deduction and credit trip up almost everyone. A deduction comes off your income before the tax is worked out, so what it saves depends on your bracket: a $5,000 RRSP deduction saves about 30 cents on the dollar for the Ontario worker in the example above. A credit comes off the tax itself. The lowest federal bracket is taxed at 14%, as the [CRA's 2026 tax rates page](https://www.canada.ca/en/revenue-agency/services/tax/individuals/tax-rates-brackets/current-year.html) shows, so a $1,000 credit takes $140 off your federal bill, and your province adds its own share on top.

Marginal and average rate are the next pair. Your marginal rate applies only to the slice of income in your top bracket, which is why a raise never drops your paycheque below where it started. Your average rate is your total tax divided by your total income, and it's always lower. Quoting the marginal rate when you mean the average is how a perfectly ordinary bonus ends up sounding like a disaster.

GST/HST and PST are the third. The first is federal or shared with the province, the second is a separate provincial tax in some places, and a ballpark guess about "sales tax" can be off by several percentage points depending on where you live.

## What if a term isn't here?

Don't worry, you aren't alone. Even the CRA's own pages sometimes use a different word for the same thing, and a term from a news story can mean something slightly different once it reaches a form.

You'll feel better once you've read one guide from start to finish, so we'd suggest [how Canadian taxes work](https://tax-services.ca/guides/how-canadian-taxes-work), and keep the [tax calendar](https://tax-services.ca/tax-calendar) handy. The [limits and rates page](https://tax-services.ca/tax-numbers) has the figures behind terms like basic personal amount and RRSP limit, and the [checklists](https://tax-services.ca/checklists) show which slips and receipts you'll need at tax time. We don't give advice on your own return, so for that, ask a qualified preparer.

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Source: https://tax-services.ca/glossary
Last updated: 2026-10-09
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