Which of the following is the correct method for starting with total income and computing taxable income?
A)Calculate gross income, apply tax credits, subtract deductions
B)Add all deductions and subtract the credits from total income
C)Subtract RRSP contributions and subtract non-refundable tax credits from total tax
D)Calculate total income, subtract deductions, calculate taxable income

Question

Quizplus · Accepted Answer

The correct method for starting with total income and computing taxable income is to first calculate total income, then subtract deductions which will result in taxable income. This method is described in option D. Option A mixes up the order by applying tax credits before subtracting deductions. Option B suggests adding deductions, which is incorrect as deductions are subtracted from total income. Option C focuses on RRSP contributions and non-refundable tax credits which might not apply to every taxpayer, making it a less effective answer.

Which of the Following Is the Correct Method for Starting