Major classification variables

We used the following variables in one or more of the tables in this publication:

• taxable or non-taxable
• income classification
• major source of income
• age and sex
• geographic classification
• marital status classification
• province or territory of residence

Taxable or non-taxable classification

We considered a return taxable if there was at least two dollars of tax payable.

We considered a return non-taxable when the sum of federal tax and provincial tax was equal to or less than one.

However, we classified some returns as taxable even when the return showed a total income less than the allowable basic personal amount of $8,012. This happened for:

• individuals subject to the minimum tax
• individuals who withdrew a forward-averaging amount
• returns filed by certain non-residents for income earned in Canada that's not subject to personal amounts
• individuals who resided in Canada for only part of a tax year (these individuals paid tax on the income they earned during their period of residence in Canada, and as a result they're entitled to tax credits only for that period).

A small number of individuals classified in the upper income ranges used a variety of deductions and tax credits that may have resulted in their achieving a non-taxable status. Among the deductions they used to reduce taxable income were: carrying charges (such as interest paid to earn investment income); business or farm losses of previous years; and allowable business investment losses.

Furthermore, taxfilers may use non-refundable tax credits -- such as charitable donations, gifts to Canada or a province or territory, or dividend and foreign tax credits -- to reduce their net tax to zero.

Income classification

Unless otherwise indicated, the income classes presented in the tables are based on the total income assessed. This corresponds to line 150 of the return and includes:

• employment income
• pension income
• investment income
• self-employment income
• income from certain other sources
• tax-exempt income.

Total income assessed may differ from the true economic income presented in other publications because it doesn't include certain non-taxable incomes and it may include some incomes that have been grossed-up.

You'll find a detailed list of non-taxable incomes in Item 24: Total income assessed.

We grouped returns into income ranges that include the lower limit but not the upper limit.

• For example, if the income range is $20,000 to $25,000, total income must be at least $20,000 but not more than $24,999.

Major source of income classification

Taxfilers do not have to report their type of work or occupation. For these classification statistics, we based the major source of income classification on the largest source of gross income.

For example, if a taxfiler earned a salary but received more income from investments, we classified the taxfiler as an investor, not as an employee.

For self-employment income, we used only the gross income to determine the major source of income. If a taxfiler was involved in a business partnership, we used only the taxfiler's share of the gross income.

Gross income was not available for some self-employed people. In these cases, we multiplied net income by a factor to arrive at an estimated gross. We used this estimated gross income to code only the major source of income.

This list describes the majority of taxfilers who make up each of the nine major income classifications we use:

• Employment - taxfilers employed by a business, institution, school, federal or provincial Crown corporation, or some form of government body.
  
  
• Farming - self-employed taxfilers who earned their major source of income from farming.
  
  
• Fishing - self-employed taxfilers whose major source of income is from fishing as boat owners or crew members or from fishing from shore.
  
  
• Professional income -self-employed taxfilers whose major source of income is professional fees (including accountants, doctors and surgeons, dentists, lawyers and notaries, engineers and architects, as well as entertainers, artists, etc.).
  
  We classify professionals who earn most of their income in the form of salaries as employees. As a result, the number of professionals shown in the publication may be less than the number shown in professional directories.
  
  
• Sales - taxfilers whose major source of earnings is commission income from self-employment.
  
  
• Business proprietorship or partnership - taxfilers whose major source of income is business income.
  
  
• Investment - taxfilers whose major source of income is interest, taxable dividends from Canadian corporations, taxable capital gains, and other investment income.
  
  
• Pension - taxfilers whose major source of income is pensions.
  
  
• Unclassified - taxfilers whose major source of income is alimony, Employment Insurance, the Canada Child Tax Benefit, or other unspecified income.

Age and sex classification

We derive the age figures from the taxfiler's reported year of birth on page 1 of the return. We included returns with no reported date of birth in the total.

We also identify the sex of the taxfiler from information on the return. Where the taxfiler did not indicate sex and we cannot determine it from the contents of the tax return, the taxfiler information is coded as "male".

Geographic classification

As we process each return, we assign a 10-digit locality code to it. We base the code on the taxfiler's mailing address and used the first seven digits from Statistics Canada's 2001 census Standard Geographical Classifications (SGC). Where the population of a place is too small to be considered alone, we assign the same code to several areas. Since all geographic data are based on these locality codes, we cannot always generate separate statistics on a single village.

The address indicated on the return may be different from the address of the taxfiler's residence. The taxfiler may have used another address such as the employer's address. We make every effort to ensure that the locality code is not based on the address of the accounting firm that filed the return.

Moreover, a taxfiler may give a Westmount address while another, residing nearby, may indicate Montréal. These two taxfilers will then have different locality codes. We would, however, group them together in the same census division.

Marital status classification

We derive the marital status from information provided by the taxfiler on the return. When taxfilers do not report their marital status, we classify them as married if they meet either of the following conditions:

• the taxfiler claims a married exemption; or
• the taxfiler reports a spouse's net income to claim the Child Tax Benefit.

Provincial or territorial classification

Province or territory of residence -- which is used in most tables -- is indicated by the taxfiler's mailing address at the time of filing.

However, the province or territory of taxation used in Table 1, differs in that it corresponds to where the taxfiler lived on December 31, 2004. In other words, it refers to the province or territory to which he or she paid taxes.

The province or territory of residence and the province or territory of taxation are different for taxfilers who moved to another province or territory sometime between December 31, 2004, and the day when they mailed their returns (usually before April 30, 2005).

Date modified:

2006-09-14