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 income tax bill. If you meet certain personal or financial requirements, you may be eligible for several of them.

How tax credits work

Income tax in Canada is calculated at the federal, provincial, and territorial levels based on your tax bracket, a category based on how much you earn . However, you may be able to lower your tax bill using tax credits and deductions.

Tax deductions are applied first to your total income, reducing it so you’ll pay tax on a smaller amount. Tax credits then directly reduce the amount of tax you owe — and could even help you qualify for a tax refund. A variety of tax credits are offered by federal, provincial, and territorial governments in Canada.

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, provincial and territorial level: refundable and non-refundable.

Both types of tax credits reduce the amount of tax you owe. The difference is what happens if that amount gets to zero.

If you can claim more in refundable tax credits than you owe in income tax, you’ll get the difference as a tax refund. Even if you owe no income tax at all, you’ll be able to claim refundable credits and get the full amount back as a refund. For example, if you owe $1,000 in taxes and claim $2,500 in refundable tax credits, you’ll get a refund of $1,500.

In contrast, non-refundable tax credits can only help cancel out your taxes owing. 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. If that $2,500 was in non-refundable tax credits, your tax bill would be reduced to $0, but you wouldn’t get a refund.

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 portion of this amount based on your net income can then be claimed as a credit to reduce taxes payable.

For example, the maximum federal basic personal amount for the 2024 tax year is $15,705 for people who earned $173,205 or less.

There are also provincial basic personal amount credits that can be claimed to reduce provincial taxes.

Home buyers’ amount

First-time home buyers can claim the Home Buyers’ Amount, a non-refundable tax credit that allows you to claim up to $10,000 spent on the purchase of a qualifying home. 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 quarterly payment is given to Canadians with low to moderate incomes and aims to help offset the taxes they pay on products and services throughout the year.

Child care credits

There are also a number of tax credits at the federal, provincial and territorial levels for parents of young children, like the Canada child benefit. Federal tax credits that may help parents include the Canada caregiver credit, disability tax credit and Canada workers benefit.

Your province or territory may have child care tax credits as well, which may show up as direct deposits in your bank account labeled “Canada PRO deposit” (“PRO” stands for provincial). For example, Ontario residents may receive the Ontario trillium benefit, and Alberta residents may get the Alberta child and family benefit.

Other tax credits

You might also qualify to claim tax credits based on your:

Age.
Pension income.
Disability.
Charitable donations.
Medical expenses.
Education expenses, such as tuition and textbooks.
Volunteer service, such as with a search and rescue group.
Digital news subscriptions.

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 learn more about available tax credits (and deductions, which can help lower your taxable income).

It also 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, prompted to answer questions about which credits might apply to your situation, or directed to review a list of credits.

How to actually claim these tax credits depends on the tax credit itself. Some tax credits, like the GST/HST credit, are automatically paid out if you’re eligible based on the income reported on your tax return. Other tax credits need to be claimed on your tax return based on your eligibility. For example, you’ll need to list eligible medical expenses and their amounts in order to qualify for the credit. You can research how to apply for various tax credits using the resource links above or speak to a professional about your options.