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What is Net Income?

If you look at your pay stub, you will usually see a larger number called gross income. This is the total amount you earned before any deductions.

Net income is always smaller than gross income because it accounts for deductions like income tax, Employment Insurance (EI), Canada Pension Plan (CPP) contributions, and other costs.

For example, if you earn $2,500 in gross income but pay $400 in taxes and deductions, your net income will be $2,100.

Net Income Definition

  • Net Income: Net income is the amount of money you have left after all your expenses, taxes, and deductions are taken out of your total earnings. It is sometimes called “take-home pay” because it is the money you actually bring home and can use.

Gross vs Net Income

It is important to know the difference between gross income and net income:

  • Gross income: Total income before deductions. This includes wages, tips, and other earnings.
  • Net income: What remains after deductions.

If you apply for a payday loan, lenders will ask about your net income because it shows how much money you truly have available to repay the loan.

What is Adjusted Gross Income?

Adjusted gross income is your total gross income minus specific deductions allowed by the Canadian government. These deductions might include expenses for childcare, education, or moving for work.

Why Net Income Matters

Net income helps you plan your budget. When you know how much money you can actually spend, you can make better choices about bills, savings, and other expenses.

For lenders like Speedy Cash, net income is one of the most important factors in deciding if you qualify for a loan. They need to see that you will have enough money left after expenses to pay the loan back by your next paycheque.

How to Determine Net Income

  1. You can find your net income by checking your pay stub. It will show your gross income and a list of deductions. Subtract the deductions from the gross income to get your net income.
  2. If you are self-employed, it can be trickier. You will need to add up all your earnings and subtract business expenses and taxes.
  3. Another way is to use a net income calculator. Many online tools can help. These calculators ask for your income amount, province, and other details. They then estimate how much tax and other deductions you will pay and show your net income.
  4. Tip: Choose a Canadian net income calculator so that it matches our tax system.

New Income Calculation Example

Here’s how you might calculate net income for someone in British Columbia:

  • Gross income: $3,000
  • Deductions:
    • Income tax: $400
    • CPP: $150
    • EI: $50

Net income: $3,000 – ($400 + $150 + $50) = $2,400

A net income calculator can save you the trouble of adding and subtracting everything by hand.

How to Increase Net Income

If your net income is too low to meet your needs, there are a few ways to improve it:

  • Work extra hours if possible
  • Ask for a pay increase
  • Reduce deductions if you are overpaying taxes
  • Take on a side job

Remember that lenders will only look at your net income after all deductions.

Where Net Income is Used

Net income is used for more than just loan applications. It is also important when you:

Net Income by Province

Taxes and deductions can vary depending on the province. For example, income tax rates in Alberta are different from those in Ontario. This means your net income will not be the same in every province, even if your gross income is the same.

If you live in a province like Saskatchewan or Nova Scotia, you can expect slightly different deduction amounts. This is why using a province-specific net income calculator is helpful.

Loan Requirements and Net Income

Speedy Cash uses net income as part of its loan decision process. When applying for a payday loan, you will need to provide proof of your net income and other details.

Speedy Cash Loan Requirements

  • One piece of Government Picture ID
  • Pre-Authorized Debit Form (PAD)
  • 30–60 Day Bank Statement
  • Proof of Address
  • Most recent Pay Stub (if your income is not Direct Deposit)

Geographic Service Areas

Note: Speedy Cash does not offer loans 24/7. Loan processors work during business hours.

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Summary

Net income is the amount of money you earn after all deductions and taxes have been taken from your gross pay. Net income is important for budgeting, applying for loans, and managing everyday finances. Always use your net income to accurately plan expenses and repayments.