Deductions and Non-Refundable Tax Credits

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Two words do most of the work on a Canadian tax return: deductions and credits. They sound similar, but they work differently — a deduction lowers the income the tax rates apply to, while a non-refundable credit lowers the tax itself. This guide explains the difference and walks through the deductions and credits most people claim, with the 2026 figures. It describes the rules only; it cannot tell you what to claim.

Deduction or credit?

A deduction reduces your taxable income, so it saves tax at your marginal rate. A non-refundable credit reduces your tax payable by a fixed percentage of the amount claimed, and it cannot create or increase a refund — it can only reduce tax to zero. The basic personal amount is a credit; an RRSP contribution is a deduction.

Common deductions

The best-known deduction is the RRSP contribution. Money you put into a Registered Retirement Savings Plan is generally deductible in the year you contribute it, and it grows tax-sheltered until you withdraw it in retirement, when withdrawals are taxed as income. For 2026 the RRSP limit is 18% of your 2025 earned income, up to a maximum of $33,810. Unused room carries forward, and your exact limit is printed on your Notice of Assessment.

Other common deductions include union and professional dues, child care expenses, moving expenses (in limited circumstances, when you move for work or study), and the cost of tools for tradespeople. Each has its own conditions and limits, and the CRA’s guide for each deduction states them. Keep the receipts: a deduction without proof can be denied on review.

The Canada employment amount

The Canada employment amount is a non-refundable credit for people with employment income. It is meant to recognise the costs of working — uniforms, supplies, commuting — without requiring receipts. For 2026 the amount is $1,501, claimed at the lowest federal rate.

You claim the lesser of $1,501 and your actual employment income. Because it is a credit, not a deduction, it reduces your tax by 14% of the amount claimed — about $210 at most. It is claimed automatically by most tax software if you have employment income; you do not need to keep receipts for it.

Medical expenses and charitable donations

Medical expenses are claimed as a non-refundable credit, not a deduction. You can claim eligible medical expenses you paid for yourself, your spouse, and your dependants, above a threshold based on your income. The CRA publishes a long list of eligible expenses — prescription drugs, dental work, and many others — and the list changes from time to time, so check the current list on canada.ca.

Charitable donations are also claimed as a credit, and they are unusually generous: the credit rate is higher on donations over $200 than on the first $200. You need official receipts from registered charities, and you can carry unused donations forward for up to five years. Donations of cash to a person, however worthy, are not eligible.

RRSP and TFSA: the pointers

Two accounts come up in almost every tax conversation, and both are pointers here rather than full guides. The RRSP (above) is a deduction when you contribute and taxable when you withdraw. The TFSA — Tax-Free Savings Account — is the opposite: contributions are not deductible, but withdrawals are tax-free, and nothing the account earns is taxed. The 2026 TFSA limit is $7,000, and someone eligible since 2009 who never contributed has up to $109,000 of room.

Both accounts punish over-contributions: excess amounts are taxed at 1% per month until withdrawn. Check your room in CRA My Account before you contribute. RRSP contributions for a tax year can be made until the 60th day of the following year — for the 2025 tax year, that was 2 March 2026.

Credits with their own guides

Some credits are big enough to have their own guides on this network, and this site only points to them. The Disability Tax Credit — a non-refundable credit for people with a severe and prolonged impairment — is covered in full at dtc.tapetoolhq.com. The Canada Child Benefit and the GST/HST credit, which are payments rather than credits against tax, are covered at ccb.tapetoolhq.com and gstcredit.tapetoolhq.com. The benefits overview guide on this site summarises all of them in one place.

Sources: Canada Revenue Agency, canada.ca; CRA, RRSP and TFSA limits 2026; CRA, medical expenses; CRA, charitable donations.

General information only. This page explains deductions and non-refundable tax credits in plain English. It is not tax advice, and it cannot tell you what to claim, what you owe, or how to file your own return. Always confirm the current rules, rates, and your own position on canada.ca or in your CRA My Account before you act. If you need advice about your own taxes, speak to a qualified tax professional. Contact: hello [at] tapetoolhq.com.