Source Deductions Calculator Ontario 2018
'/%3E%3Ccircle cx='48' cy='39' r='19' fill='%23f2c9a5'/%3E%3Cpath d='M27 35c3-16 39-17 42 2-8-8-27-9-42-2z' fill='%23374151'/%3E%3Cpath d='M21 86c5-24 49-28 56 0z' fill='%232563eb'/%3E%3Ccircle cx='41' cy='41' r='2' fill='%23111827'/%3E%3Ccircle cx='55' cy='41' r='2' fill='%23111827'/%3E%3Cpath d='M42 52c4 3 9 3 13 0' stroke='%2392400e' stroke-width='3' fill='none' stroke-linecap='round'/%3E%3C/svg%3E)
Reviewed by Calculator Editorial Team
Source deductions in Ontario are important for determining your taxable income. This calculator helps you compute your source deductions based on the 2018 tax rules. Understanding these deductions can help you optimize your tax situation and maximize your take-home pay.
What are source deductions?
Source deductions are expenses that reduce your taxable income. They are called "source" because they come from the same source as your income. Common examples include:
- Business expenses
- Medical expenses
- Donations to charity
- Union dues
- Certain types of investment expenses
Source deductions are different from capital cost allowance, which is a separate type of deduction for business assets.
How to calculate source deductions
Calculating source deductions involves several steps:
- Identify all your eligible expenses
- Calculate the total of these expenses
- Subtract the total from your gross income to get your taxable income
The exact calculation depends on the type of deduction and your specific circumstances. Some deductions have specific rules and limitations.
Example calculation
Let's look at an example to illustrate how source deductions work. Suppose you have the following information:
- Gross income: $50,000
- Medical expenses: $2,500
- Charitable donations: $1,200
- Business expenses: $8,000
Your total source deductions would be $2,500 + $1,200 + $8,000 = $11,700. Your taxable income would then be $50,000 - $11,700 = $38,300.
Key formulas
The basic formula for calculating taxable income with source deductions is:
Taxable Income = Gross Income - Total Source Deductions
For specific types of deductions, there may be additional formulas or limitations. Always consult the Canada Revenue Agency (CRA) guidelines for the most accurate information.
Frequently Asked Questions
What is the difference between source deductions and capital cost allowance?
Source deductions come from the same source as your income, while capital cost allowance is a deduction for business assets. Source deductions are subtracted from your gross income, while capital cost allowance is added to your net income.
Are all expenses eligible for source deductions?
No, only certain types of expenses qualify as source deductions. Common examples include medical expenses, charitable donations, and business expenses. Always check the CRA guidelines for your specific situation.
How do I claim source deductions on my tax return?
You can claim source deductions on Schedule 1 of your income tax return. Make sure to keep proper records of your expenses to support your deductions.