Updated Checked by the Tax-Services.ca editorial team How we check
Income tax deductions come off your income before tax is worked out, so each one saves tax at your top rate. For an Ontario worker earning $90,000, $12,000 of deductions cuts federal and Ontario tax by $3,558, about 29.65 cents on the dollar. A credit comes off the tax itself and, for most federal credits, saves only 14%.
What’s the difference between a deduction and a credit?
A deduction is subtracted from income first, and the saving grows with your marginal rate, so a higher earner gains more. A credit is subtracted from the tax bill itself. Most federal credits are worth 14% of the amount in 2026, which is the lowest federal rate on the CRA’s 2026 tax rates and income brackets page. So a $1,000 credit amount saves $140 in federal tax. Your province adds its own credit on top, and the tax deductions and credits calculator leaves that out.
Here are the two side by side. At a combined marginal rate of 29.65%, a $1,000 deduction saves $296.50. A $1,000 credit amount saves $140 federally. Same thousand, very different result, which is why people chase deductions first.
Which income tax deductions can you claim?
| Deduction | Rule |
|---|---|
| RRSP or FHSA contribution | Room is 18% of last year’s earned income up to $33,810 for 2026, minus any pension adjustment |
| Moving (line 21900) | New home at least 40 km closer to new work or full-time school |
| Union and professional dues (line 21200) | Annual dues only, not initiation fees or licences |
| Child care (line 21400) | Paid so you could earn income, study or do research; use form T778 |
| Carrying charges (line 22100) | Investment management fees and interest on money borrowed to earn investment income |
| Employment expenses (line 22900) | Most claims need form T2200 from your employer |
The table is a short list, not every deduction on the return. Home office costs for employees and tradespeople’s tools have their own rules, so see our guides on home office expenses and moving expenses, or the wider list of personal tax deductions in Canada.
How much does a $12,000 deduction save?
Take employment income of $90,000. With no deductions the calculator shows $17,034 of tax. Add a $10,000 RRSP contribution and $2,000 of other deductions and tax falls to $13,476. You keep $3,558.
Credits are a different sum. Enter $1,000 of credit amounts and the calculator shows $140 saved. The $12,000 of deductions saved far more, because deductions save at your marginal rate and this credit saves 14%. So compare claims by the dollars they save, not by the size of the amount.
The RRSP tax savings calculator sets the contribution against your room. Your marginal tax rate tells you what each extra deduction is worth at your income.
Income matters too. The same $5,000 RRSP contribution saves $1,482.50 at $90,000 in Ontario, which is 29.65 cents on the dollar. At $50,000 it saves $1,102.50, or 22.05 cents. That is 19.05 cents of federal and Ontario tax plus a $150 drop in the Ontario Health Premium, because the contribution pulls taxable income under $48,000. So the lower earner gets less back for the same deposit. That doesn’t make the RRSP a bad idea, but run both incomes through the calculator before you choose how much to put in. Unused room isn’t lost either. It carries forward, so a small deposit this year doesn’t shut the door. The room is yours to track, and your CRA notice of assessment shows your figure. The deadline for the 2026 tax year is March 1, 2027 (details here), and the RRSP dollar limit is $35,390 for 2027.
Which deductions do people miss?
Moving costs are one. They can include selling costs for the old home and legal fees on the new one, though the deduction is limited to income earned at the new location, and unused amounts carry forward.
Carrying charges cover reasonable preparation fees if you have business or property income. Employees generally can’t claim tax preparation fees. And if you’re self-employed, a self-employed tax calculator shows how business expenses lower tax and CPP together.
Take Dana, who moved from Halifax to Calgary for a new job. Her moving receipts for the truck, the hotel on the way and the legal fees on the new place can add up fast, and a deduction at her top rate is worth far more than a credit of the same size. Sort those receipts at tax time instead of tossing them.
Where do claims go wrong?
- Claiming union dues twice. Use box 44 of the T4 or the receipt, not both.
- Deducting interest on money borrowed to buy an RRSP or TFSA. The CRA doesn’t allow it.
- Going over RRSP room. The CRA allows a $2,000 buffer, then charges 1% a month on the excess (see the RRSP over-contribution penalty).
- Claiming brokerage commissions as a deduction. They belong in the capital gain calculation.
- Missing the contribution deadline. For the 2025 tax year it was March 2, 2026, and for the 2026 tax year it is March 1, 2027.
The calculator counts only the fields it shows. Provincial credits, surtaxes and income-tested benefits are left out, so your return may differ.
What records should you keep for deductions?
Keep the receipt, the form and a note of what the cost was for. The CRA’s usual rule is six years from the end of the tax year the claim relates to, and an RRSP receipt, a T2200 and child care receipts all count. A claim without paper is the one that gets reversed when the CRA asks for support.
- Check the line on the return that matches the deduction.
- Match the claim to a slip, receipt or form before you enter it.
- Work out the saving at your own marginal rate with the marginal tax rate calculator.
- Save the paperwork next to your return. The tax write-off guide covers business costs.
Where we checked this information
Checked in November 2026: the CRA’s 2026 tax rates and income brackets (federal 14% up to $58,523, Ontario 5.05% up to $53,891 and 9.15% above) and its RRSP limits table ($33,810 for 2026, $35,390 for 2027). Deduction rules come from CRA pages for lines 21200, 21900, 22100 and 22900 and its deductions overview. Dollar examples come from our own calculator. We’re an independent site, and no government body is behind it.
Frequently asked questions
How do deductions and credits differ?
A deduction comes off income and saves tax at your marginal rate, so it is worth more to a higher earner. A federal credit comes off the tax itself and saves 14% of the amount for 2026. A $1,000 deduction at 29.65% saves $296.50, while a $1,000 credit amount saves $140.
How much does a $10,000 RRSP contribution save?
For $90,000 of income in Ontario, a $10,000 contribution plus $2,000 of other deductions saves $3,558 in tax. That is about 29.65 cents on each dollar, and the saving is smaller at lower incomes because the marginal rate is lower.
What is the RRSP limit for 2026?
Up to $33,810, capped at 18% of the prior year’s earned income and reduced by any pension adjustment, plus unused room carried forward. For 2027 the CRA’s limits table shows $35,390. Your notice of assessment shows your own room. Contributions made by March 1, 2027 count for the 2026 return.
Can an employee deduct tax preparation fees?
For most employees, no. The CRA does not allow them as an employment expense, though commission employees may claim reasonable accounting fees. Investment management fees and some carrying charges are a separate deduction for people with investment income. Check the CRA line before you claim.
Which moving costs can I deduct?
Your new home must be at least 40 km closer to your new work or full-time school. The deduction is limited to income earned at the new location, and any unused amount carries forward to the next year. Keep the receipts and the dates of the move.
How long do I keep receipts for deductions?
The CRA’s usual rule is six years from the end of the tax year the claim relates to. Keep the receipt, any required form such as the T2200 or T778, and a note of what the cost was for, in case the CRA asks for support.
- How Canadian income tax works: brackets and credits
How federal and provincial Canadian income tax stack up, what marginal and average rates mean, and how credits and deductions change your bill