Line 23600 net income

How line 23600 is calculated

The return instructions say to take the amount on line 15000 and subtract the total of lines 20700 to 23500. Those lines hold the first group of deductions, such as registered plan contributions and certain expenses. If the result is negative, you enter zero but keep a note of the negative figure.

This is net income for tax purposes. It is not the net income on a business income statement, which is an accounting profit, and it comes before the further deductions that lead to taxable income on line 26000.

Why it matters beyond the tax bill

The CRA says your net income is used to work out your federal and provincial or territorial non-refundable credits. It also uses your net income, and your spouse’s or common-law partner’s, to calculate amounts such as the Canada child benefit, the GST/HST credit and social benefits repayment.

That makes this line worth managing even where little tax is payable. A deduction that lowers net income can change the benefits calculated from it, which is something to review rather than assume. If you have a spouse or common-law partner, you report their net income on page 1 of your return even if it is zero.

An illustrative example

Suppose someone has $60,000 on line 15000 and deductions of $8,000 on lines 20700 to 23500. Line 23600 is $52,000. If a further $2,000 carry-over deduction applies in the later group, taxable income on line 26000 is $50,000. The figures are illustrative only.

If the amount is negative

A negative amount may mean a non-capital loss. The CRA directs you to Form T1A, Request for Loss Carryback, to work out the loss and any amount you want to carry back. It says not to file an amended return for the years you apply the loss to. In some cases the negative amount can also be used to reduce adjusted net income in certain credit and benefit calculations, depending on what caused it, so keep a note of it.

What to discuss with your accountant

Ask how each deduction changes net income, whether your family’s benefits are sensitive to it and how a loss should be recorded. Bring your slips, receipts and your notice of assessment.