Common Canadian Tax Deductions and Credits: An Overview for Ontario Residents

Every year Canadians leave money on the table by not claiming tax deductions and credits they are entitled to. Some are straightforward; others depend on your personal circumstances. This overview of common tax deductions and credits available in Canada — including Ontario-specific programs — gives you a map of the landscape so you know what to explore with your accountant.

Note: this article explains the types and concepts. Verify current amounts, income thresholds, and eligibility rules with the CRA or a qualified accountant, as they change with each federal and provincial budget.

Deductions vs. Credits: Two Completely Different Animals

Before listing specific items, it is essential to understand what each type of tax reduction actually does:

• A tax deduction reduces your taxable income. Its value depends on your marginal tax rate. If you are in a 40% combined marginal bracket and you have a $1,000 deduction, it saves you $400. The same deduction saves a lower-income person less.
• A tax credit reduces your tax owing directly, dollar for dollar (or a percentage of an eligible amount). A $200 non-refundable federal tax credit reduces your federal tax by $200, regardless of your income. Most credits are applied at the lowest federal or provincial rate — they do not scale with your marginal rate.
• Non-refundable credits can only reduce your tax to zero — any excess is lost. Refundable credits can generate a refund even if you owe no tax.

Common Federal Tax Deductions

RRSP Contributions

Contributions to a Registered Retirement Savings Plan within your available contribution room are deductible from employment or self-employment income. This is one of the largest available deductions for most working Canadians. See also our article on RRSP basics.

Child Care Expenses

Costs for licensed daycare, after-school programs, day camps, and similar care for children below a certain age can be deducted — generally by the lower-income spouse. The deductible amount is subject to a per-child annual limit (verify with CRA) and must be supported by receipts and the provider's SIN or business number.

Moving Expenses

If you moved at least 40 kilometres closer to a new workplace or post-secondary school, eligible moving expenses are deductible. These include moving truck costs, temporary lodging, and some incidental expenses. The deduction is limited to income earned at the new location.

Union and Professional Dues

Annual dues paid to a trade union or a professional association required for your employment are deductible. The T4 slip typically shows these amounts if your employer deducted them at source.

Support Payments

If you pay spousal support under a written agreement or court order, the amounts are deductible to the payer and taxable to the recipient (for agreements meeting CRA's requirements). Child support payments under post-1996 agreements are generally neither deductible nor taxable. Family law intersects significantly with tax here.

Carrying Charges and Interest on Investment Loans

Interest paid on money borrowed to earn income from investments (not for a RRSP or TFSA) can be deductible. There are specific rules about what qualifies.

Common Federal and Ontario Tax Credits

Basic Personal Amount

Every taxpayer gets a basic personal amount credit — a baseline slice of income that is not taxed. Both the federal government and Ontario set their own basic personal amounts.

Canada Caregiver Credit

Available if you supported a spouse, common-law partner, or dependant with a physical or mental impairment. The amount depends on the relationship and the dependant's income.

Disability Tax Credit (DTC)

A non-refundable credit for individuals with severe and prolonged physical or mental impairment, certified by a qualified medical practitioner using a CRA form. The DTC can also be transferred to a supporting family member if the person with the disability cannot use it. It can also unlock access to the Registered Disability Savings Plan (RDSP).

Medical Expense Tax Credit

You can claim eligible medical expenses for yourself, your spouse, and your dependants above a threshold (the lesser of a percentage of net income or a fixed dollar floor — verify current figures). The list of eligible expenses is long and includes prescriptions, dental care, vision care, certain medical devices, and some attendant care.

Charitable Donation Tax Credit

Donations to registered charities generate a federal credit. The rate increases on the portion above a threshold — encouraging larger donations. Ontario has a parallel provincial credit.

Canada Workers Benefit (CWB)

A refundable credit for lower-income working individuals and families, intended to supplement employment income and offset work-related expenses. Verify current income thresholds and amounts with CRA.

Ontario Trillium Benefit

A combined Ontario credit that encompasses the Ontario Sales Tax Credit, the Ontario Energy and Property Tax Credit, and the Northern Ontario Energy Credit. Eligibility and amounts are based on income, family size, and housing situation. It is paid monthly based on your prior-year tax return.

Credits You Might Overlook

• First-time home buyers' tax credit — a federal non-refundable credit for buyers of a qualifying home. Verify eligibility rules for "first-time buyer."
• Home accessibility tax credit — for eligible renovation expenses that improve accessibility in a qualifying home for a senior or a person with a disability.
• Tuition tax credit — students can claim tuition fees paid to eligible institutions. Unused credits can be transferred to a parent or spouse (up to a limit) or carried forward.
• Age amount — a credit available to individuals 65 or older, subject to income thresholds.

Frequently asked questions