In terms of small business, I wanted to know the meaning of "Earned Income".

I have been advised that Earned Income = Net Income, reported on Line 13500 (Gross Sales, minus HST collected and minus expenses paid).

Please let me know if there is anything incorrect about my understanding.


Answer

I'm wondering in what context you are asking that question. There's nothing wrong with the question, but was this anything to do with RRSPs? If you look at the form which shows the RRSP deduction limit for the next year (2020) you'll see that term in the big blue banner 3" down from the top which summarizes all the various sources of income which are used to determine "2019 earned income". Certainly the net income from any of the businesses carried on by the taxpayer (lines 13500 to 14300) would be part of the earned income used to calculate the RRSP deduction limit. But earnings from employment and other sources count too.

From an accounting perspective (as opposed to a tax perspective) it was my understanding that earned income referred to income earned from an active business as opposed to a passive one such as income from property. Not sure that is of any relevance to your question.

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