The Canadian tax system provides numerous deductions and credits that can substantially reduce your tax bill. Understanding the difference between deductions and credits — and knowing which ones you are eligible for — is essential to filing accurately and keeping more of your money.
A tax deduction reduces your taxable income. If you are in the 33% federal bracket and claim a $5,000 deduction, you save $1,650 in federal tax. The higher your income, the more valuable a deduction becomes.
A tax credit reduces the actual tax you owe, not your income. Most Canadian credits are non-refundable, meaning they can reduce your tax to zero but not below. Some credits are refundable and can generate a tax refund even if you owe no tax.
The most valuable deduction for most working Canadians. You can deduct contributions to your RRSP up to 18% of prior year earned income, to a maximum of $31,560 for 2024. Unused room carries forward indefinitely.
Payments to a licensed daycare, babysitter, day camp, or boarding school can be deducted. The limits are $8,000 per child under 7, $5,000 for children 7–16, and $11,000 for children with disabilities. The deduction must be claimed by the lower-income spouse in most cases.
If you moved at least 40 km closer to a new place of employment, business location, or post-secondary school, you may deduct eligible moving costs including transportation, storage, travel, and certain temporary living costs.
Dues paid to a union or professional association required for your employment are fully deductible.
Employees who are required by their employer to pay for certain work expenses can deduct them with Form T2200 signed by the employer. Eligible expenses include home office costs, vehicle expenses, and supplies.
If you sold shares in a small business corporation or a business debt became uncollectable, you may be able to claim an Allowable Business Investment Loss (ABIL).
Every Canadian resident receives the basic personal amount — approximately $15,705 federally for 2024. This means the first $15,705 of your income is effectively tax-free at the federal level.
Employees can claim this credit on up to $1,433 of employment income — a federal tax savings of about $215.
Claim eligible medical expenses exceeding the lesser of $2,635 or 3% of your net income. Eligible expenses include prescription drugs, dental care, vision care, medical devices, and certain therapies. You can choose any 12-month period ending in the tax year.
The donation credit is 15% on the first $200 donated and 29–33% on amounts above $200 (depending on your income). Donations to registered Canadian charities qualify.
If you have a severe and prolonged physical or mental impairment certified by a medical practitioner, you can claim the DTC — a federal credit of approximately $9,428 for adults, with an enhanced amount for those under 18.
Students can claim tuition paid to eligible post-secondary institutions. The credit is 15% federally on eligible tuition amounts. Unused credits can be carried forward or transferred to a spouse, parent, or grandparent (up to $5,000).
Canadians 65 or older can claim the age amount — approximately $8,396 federally — if their net income is below the phase-out threshold.
Multiple credits exist for Canadians who support dependent family members including a spouse with a disability, a dependent with an infirmity, or an elderly parent living with them.
Unlike non-refundable credits, these can generate a refund even if you owe no tax:
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