Employment income — what counts
Income from employment
Section 5 requires employees to include their salary, wages, and other employment remuneration in income for the year it is received.
Plain-language explanation
Section 5 establishes that your employment income is the total of your salary, wages, and other remuneration received — or "receivable" if you elected to include it — in a calendar year.
Cash-basis recognition: Unlike business income, employment income is included when *received*, not when earned. If your December 2025 paycheque is deposited January 2, 2026, it's 2026 income.
"Other remuneration" is broadly interpreted by CRA to include bonuses, commissions, vacation pay, tips (unless paid directly to you by customers), and director's fees. S.6 extends this to most non-cash benefits.
T4 slip reporting: Your employer reports your employment income on a T4 slip. Box 14 shows total employment income. This becomes the starting point on your T1 return.
Deductions from employment income are intentionally narrow — s.8 lists an exhaustive set of permitted deductions (union dues, certain vehicle and travel costs, home office for commissioned employees). You cannot claim general business expenses against employment income.
Example
Fatima received $75,000 salary plus a $5,000 bonus in her December paycheque. Her T4 Box 14 shows $80,000. She also received a company car worth $4,200 as a taxable benefit (Box 14 will include this). Total employment income: $84,200.
Amendment history
Significant changes to this provision. Older versions help you understand rules that applied in prior tax years.
COVID-19 home office rules introduced. CRA allowed a temporary flat-rate method ($2/day, up to $400) for employees working from home due to COVID, without requiring Form T2200. Available for 2020, 2021, and 2022 tax years.
Before
Only detailed method with employer-signed T2200 allowed
After
Temporary flat-rate $2/day method (max $500/year in 2021–2022) accepted without T2200
COVID flat-rate home office method discontinued. Employees must use the detailed method with a signed T2200 from their employer for 2023 and subsequent years.
Before
Flat-rate $2/day method available
After
Detailed method only — T2200 required
Common questions
Are tips considered employment income? +
Yes. Tips are employment income under s.5 or s.6. If your employer controls tip distribution (as in a restaurant tip pool), they go through the payroll and appear on your T4. Tips paid directly to you by customers must still be reported by you as employment income on your T1.
What is the difference between employment income and self-employment income? +
Employment income (s.5) is earned as an employee — the employer controls how, when, and where you work, and withholds CPP/EI. Self-employment income (s.9) is earned as an independent contractor. CRA's worker classification test looks at control, tools, chance of profit, and risk of loss.
Can I deduct home office expenses from employment income? +
Only if you meet the conditions in s.8(13): your employer required you to maintain a home office (Form T2200 signed), and you use the space exclusively and regularly for work. The deduction is also limited to your employment income — you cannot create a loss.
Key terms
Related sections
Related calculators
Source: Income Tax Act, RSC 1985, c. 1 (5th Supp.), section 5. — Read the official text on Justice Canada
These summaries are for educational purposes only and do not constitute legal or tax advice. Speak with a CPA for advice on your specific situation.