Updated Checked by the Tax-Services.ca editorial team How we check
The tax deductions in Ontario that matter most are the ones that come off your income before tax is worked out, like RRSP and FHSA contributions, child care, union dues and moving costs. At $85,000 of employment income in Ontario, a $5,000 RRSP deduction cuts your tax by $1,482.50. Most of these are federal deductions that Ontario follows, and Ontario then adds its own credits on top.
Deduction or credit, what’s the difference?
A deduction lowers the income you’re taxed on, so it saves tax at your top rate. A credit is subtracted from the tax itself. Federal credits are worked out at 14%, and Ontario’s at 5.05%, whatever your income.
In the lowest bracket the two are worth the same, about 19 cents on the dollar with both governments counted. Higher up, a deduction pulls ahead.
How much does a deduction save in Ontario?
The saving follows your combined federal and Ontario rate on the last dollars you earn. We ran a $1,000 deduction through the income tax calculator for Ontario employees.
| Employment income | Tax saved by a $1,000 deduction | Rate on the last dollar |
|---|---|---|
| $35,000 | $190.50 | 19.05% |
| $70,000 | $296.50 | 29.65% |
| $85,000 | $296.50 | 29.65% |
Say Marcus in Hamilton pays $600 a year in union dues and earns $70,000. At 29.65% the deduction saves him $177.90. Not a fortune, but it’s a few bucks back for something he’d pay anyway.
The RRSP calculator shows how it grows too.
One quirk to know about. Near $72,000 and $200,000 the rate on the next dollar spikes in narrow bands, because the Ontario Health Premium rises in steps there. It’s real, but it’s small and short.
Which Ontario tax credits are worth checking?
The CRA’s Ontario page for the 2025 return lists the ones most people can use or miss.
- The LIFT credit for low earners: 5.05% of employment income up to $875, shrinking above $32,500 for a single person (the last figures Ontario publishes, from 2022 onward).
- Seniors’ public transit: 15% of qualifying payments, up to $3,000.
- Child care through the Ontario CARE credit, and a tax reduction of $544 per dependent child.
- Fertility treatment: 25% of eligible costs up to $20,000, so a credit of up to $5,000.
- Political contributions, co-operative education hiring and some others.
The Ontario Health Premium is the other side of this. It goes up to $900, depends on taxable income, and it’s added to the tax you owe.
A worked example with an RRSP
Take an employee on $85,000 in Ontario. With no deductions the tax is $15,551.05. Put $5,000 into an RRSP and it drops to $14,068.55. The contribution costs you $3,517.50 after the tax saving. A smaller $1,000 gives back $296.50. The tax saving arrives as a bigger refund after you file, or as a smaller balance owing, so the money doesn’t reach you until the CRA has processed the return. That’s worth knowing before you count on it for a bill due in April.
Contributions made in the first 60 days of the new year can still be claimed on the previous year’s return, which is why the March rush exists. Wait to see your income, then decide how much to put in.
Want a wider check of what you can claim? The tax credits calculator combines deductions and federal credits for a quick estimate. It doesn’t include Ontario’s own credits, so add those by hand.
Can you save a deduction for a better year?
Sometimes. An RRSP contribution you make can be claimed now or carried forward and claimed in a later year, so someone in a low-income year, say a student at $18,000, might hold the deduction until a $75,000 year when each dollar saves nearly 30 cents instead of about 19. The contribution itself still counts toward your limit. Other deductions, like child care, have to be claimed in the year they apply, so don’t assume everything can wait.
Claims people miss, and limits
Employees with a T2200 can deduct some home office costs. We cover what qualifies in our guide to home office deductions. Keep receipts for all of it, and claim only the year the cost was paid.
Don’t buy something only for the deduction. At $85,000 you spend $1 to save about 30 cents, and you come out behind.
Credit amounts for 2026, like LIFT, may be indexed, and a 2026 figure wasn’t available for every Ontario credit. Use the CRA’s Ontario forms when you file.
The sources behind this page
The rates and amounts come from the CRA‘s Ontario tax information for 2025 and the Government of Ontario’s LIFT page, with 2026 federal and Ontario brackets in our calculators. No level of government runs or endorses this site.
Frequently asked questions
Does Ontario have its own tax deductions?
Ontario follows the federal deductions, such as RRSP, child care and union dues. It adds its own credits, the LIFT credit and the Ontario Health Premium on top.
How much does a $1,000 deduction save in Ontario?
$190.50 at $35,000 of employment income and $296.50 at $70,000 or $85,000, based on our calculator.
What is the LIFT credit?
It's 5.05% of employment income up to $875, reduced above $32,500 for a single person, per the Government of Ontario.
What is the Ontario Health Premium?
A charge added to your Ontario tax once taxable income passes $20,000. The CRA's Ontario page says it goes up to $900.
Is a deduction better than a credit?
For higher earners, yes. A deduction saves tax at your top rate, while a federal credit saves 14% of the amount and an Ontario credit 5.05%.
- How Canadian income tax works: brackets and credits
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- Ontario income tax and sales tax in 2026
How Ontario income tax works in 2026: the five brackets, the surtax and health premium, the 13% HST, and the calculators that switch to Ontario