Credits vs. Deductions: What's the Difference?
Before diving into specifics, it helps to understand the distinction between these two terms — because they work very differently.
- Tax deductions reduce your taxable income. For example, a $5,000 RRSP deduction reduces the income you're taxed on by $5,000.
- Tax credits reduce your tax owing directly. A $1,000 non-refundable credit at a 15% federal rate reduces your tax bill by $150.
- Refundable credits are the most valuable: they can reduce your tax below zero, resulting in a payment to you even if you owe nothing.
Key Federal Tax Credits for Canadians
Basic Personal Amount (BPA)
Every Canadian can claim the Basic Personal Amount — a non-refundable credit applied to a base amount of income before any tax is calculated. This is automatically applied to your return and ensures that low-income earners pay little or no federal tax.
Canada Child Benefit (CCB)
A tax-free monthly payment for families with children under 18. While not claimed on your tax return directly, filing your taxes each year is required to receive and maintain CCB payments. The amount is income-tested.
GST/HST Credit
A quarterly refundable credit for low- and moderate-income individuals and families to offset the GST or HST they pay. No application is needed — the CRA automatically determines eligibility when you file your return.
Canada Workers Benefit (CWB)
A refundable credit for working Canadians earning below a certain income threshold. It includes a disability supplement. You can also receive advance payments of the CWB throughout the year rather than waiting until tax time.
Disability Tax Credit (DTC)
A non-refundable credit for individuals with a severe and prolonged physical or mental impairment. You must apply through the CRA using Form T2201, certified by a medical practitioner. Once approved, the credit can be transferred to a supporting family member if the person with the disability doesn't need it.
Common Deductions to Claim
RRSP Contributions
Contributions to your Registered Retirement Savings Plan are fully deductible up to your available contribution room. This is one of the highest-impact deductions available to most Canadians.
Childcare Expenses
Daycare, after-school programs, overnight camps, and babysitters can all qualify as childcare expense deductions. Generally claimed by the lower-income spouse. The deduction is capped based on the child's age and type of care.
Union and Professional Dues
Dues paid to a trade union or professional association required for employment are fully deductible. Your T4 slip (Box 44) usually shows the amount your employer deducted at source.
Moving Expenses
If you moved at least 40 kilometres closer to a new job, school, or business location, you may be able to deduct eligible moving costs — including transport, temporary lodging, and storage.
Student Loan Interest
Interest paid on student loans under the Canada Student Loans Act or provincial equivalent programs qualifies for a non-refundable credit. Only government-issued student loan interest qualifies — not bank loans used for education.
Province-Specific Credits
Beyond federal credits, each province and territory offers its own set of credits and deductions. Examples include:
- Ontario Trillium Benefit – a combined credit covering energy costs, property tax, and sales tax
- BC Climate Action Tax Credit – a quarterly payment for eligible BC residents
- Alberta Child and Family Benefit – income-tested quarterly payments for families with children
Most tax software will automatically apply provincial credits when you enter your province of residence.
Tips for Claiming Successfully
- Keep all receipts and documentation for at least 6 years — the CRA can request proof at any time.
- Use CRA My Account to check your carryforward credits (tuition, capital losses) before filing.
- Don't assume you don't qualify — read the eligibility criteria carefully or use the CRA's online tools.
- Consider whether transferring credits to a spouse or supporting person makes sense for your household.