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If you are considered a Canadian resident for tax purposes, you are generally required to report income from all sources (both in Canada and abroad). In other words: start by reporting everything, then apply the rules, deductions, and credits that apply to your situation.
To estimate your tax, calculations usually start with net income (total income minus certain deductions). Deductions are amounts you can subtract from your total income to reduce your taxable income (for example: RRSP contributions, certain eligible employment expenses, eligible moving expenses, etc.).
Next, tax is calculated using tax brackets (a progressive system): each portion of income is taxed at its own rate. In practical terms, earning more doesn’t mean your entire income is taxed at the highest rate—only the portion that exceeds each threshold.
At the federal level, thresholds and rates also vary by bracket.
Finally, tax credits (which directly reduce the tax payable) and certain refundable amounts are applied (which may be paid even if you don’t owe tax). This is often where filing early—with complete documentation—makes a real difference.
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