Definition of ‘Other Income’
‘Other Income’ is taxable income that has not been or should not be reported anywhere else on the return.
Source: CRA website.
How you choose to declare income can have short-term and long-term effects.
Line 104 and Line 130 on your Canadian Income Tax Return are usually intended for ‘Other Income’ – one-off income amounts that aren’t considered to be part of your normal earning. For example, let’s say you work a regular job, but one weekend your aunt hires you to paint her garage for $500. The income is part of your earnings, but it’s an exception and not really your normal job. For that reason you’d declare that income on one of the ‘Other Income’ lines.
Your pension is meant to replace regular, routine earnings, and amounts on Line 104 and Line 130 are by definition non-routine income. Consequently when you declare income on one of these lines it’s not considered part of your pensionable earnings, nor is it subject to CPP contributions.
Some income can be interpreted in more than one way. An arts grant, for example, can be treated as ‘Other Income’ because it’s a lump sum that isn’t part of the usual supply of services and invoice cycle. However for many artists in Canada – musicians in particular – grants are a way of life, and a very important part of their business.
When things are ambiguous like that, you can choose: declare the income as Other, or treat is as part of your business income.
If you declare it as ‘Other’ your bill may be lower because you don’t have to pay CPP on it (nor will you have to pay Employment Insurance premiums, if you have opted into EI for self-employed people).
If you declare it as business income, on the other hand, you will have to pay the premiums. However when you retire the CPP payments you receive will be higher.
Have you declared income one way and wished you hadn’t? If the return is less than ten years old you can still go back and make a change.
Click here to get started – let us know you want to make an adjustment to a return and we’ll take care of the rest.