Tax Credits in Canada: Claim Them to Pay Less

Tax Credits in Canada: What They Are and How to Use Them

If you're able to claim them, tax credits can reduce your overall tax bill. Find out which tax credits might apply to your personal and financial situation.

Couple sitting at table researching tax credits in Canada.

Tax credits act like a discount on your overall income tax bill. If you meet certain personal or financial requirements, you may be eligible for several of them.

How tax credits work

Taxes in Canada are calculated based on income at both the federal and provincial level, but some years you may wind up paying the government less than what your tax bracket dictates. When that happens, tax credits generally deserve some of the…well, credit.

Tax credits are incentives offered by federal, provincial, and territorial governments of Canada that directly reduce the amount of tax you owe. Tax credits are different from tax deductions, which reduce the amount of income that can be taxed in the first place.

Assuming you qualify for them, there is no limit to the number of tax credits you can use. Tax credits increase — but don’t guarantee — your chance of receiving a tax refund from the government.

Types of tax credits

There are two types of tax credits available to you on a federal and provincial level: refundable and non-refundable.

Refundable tax credits will be given to you no matter how little income tax you owe. Even if you owe no income tax at all, you can still claim a credit for its established amount.

Non-refundable tax credits, on the other hand, can only help cancel out your payable taxes. If you don’t owe any taxes, or your total non-refundable tax credits exceed what you owe, you will not be credited any leftover amounts.

Common Canadian tax credits

These are a few of the most popular tax credits Canadians can take advantage of. Eligibility will vary according to individual circumstances.

Basic Personal Amount

This non-refundable tax credit allows all taxpayers to claim a basic personal amount, which changes every year based on inflation. A percentage of this amount can then be claimed as a credit to reduce taxes payable. For example, the maximum federal basic personal amount for the 2023 tax year is $15,000. There are also provincial basic personal amount credits that can be claimed to reduce provincial taxes.

Home Buyer’s Amount

First-time home buyers can claim the Home Buyers Amount, a non-refundable tax credit which can reduce the federal taxes you owe by up to $1,500. Note that there are several rules surrounding eligibility for this credit.

GST/HST credit

Eligible Canadians who file a tax return will automatically receive the goods and services tax/harmonized sales tax credit, more commonly referred to as the GST/HST credit. This tax credit is given to Canadians with low to moderate incomes and is to help offset the taxes they pay on products and services throughout the year. It is paid out four times per year.

Child care credits

There are also a number of tax credits at both the federal and provincial level for parents of young children, like the Canada Child Benefit. Federal tax credits that may help parents include the Canada caregiver amount, disability tax credit and Canada workers benefit. Your province or territory may have child care tax credits as well.

Other categories that tax credits fall under include:

Age.
Pension income.
Disability.
Charitable donations.
Medical expenses.
Work from home expenses.
Education expenses.
Union dues.
Moving expenses.

Based on their financial circumstances, Alberta or Ontario residents may be eligible to receive CRA’s child and family benefit payment, the Canada PRO deposit.

If you’re unsure of what you can claim to help reduce the income tax you owe, use online tools from the government of Canada to help research potential tax credits and deductions.

Alternatively, it might be worth your while to arrange a meeting with a trusted accountant or tax preparation professional who can help you determine what credits you may qualify for.

Finding and claiming tax credits in Canada

One way to find potential federal tax credits is to visit the Government of Canada website and search for topics that apply to you.

You can also browse the provincial and territorial tax credit directory to uncover more potential credits. While it’s handy to know what you might be eligible for and what to expect, this research is really only necessary if you’re preparing your own tax return by hand.

If you hire a tax professional to prepare your return, they should locate and claim all of the credits that apply to you. Likewise, if you use an online tax software program, you should be alerted to any relevant tax credits.

How to actually claim these tax credits depends on the tax credit itself. Some tax credits are automatically paid out to eligible individuals, while other tax credits need to be applied for so eligibility can be verified. You can do your own research using the resource links above or speak to a professional about your options.