Personal Income Tax Deductions in Canada

Canada’s federal and provincial governments use income tax deductions or credits to reduce the tax for some taxpayers and to promote certain activities considered to be beneficial. Some deductions reduce the income subject to tax, while others reduce the amount of the tax directly. As a taxpayer, you should be aware of all the deductions that are available to avoid an overpayment of taxes and possibly increase your tax refund.

Deductions That Reduce Taxable Income

Deductions are taken after calculating your Total Income on Line 15000 of your tax return.  Certain deductions are used to arrive at your Net Income – Line 23600. You can, for example, deduct RRSPs, Child Care Expenses, Employment Expenses, just to name a few. Your total income minus these deductions equals your net income.

Then there are items you may be able to deduct from the net income to arrive at your Taxable Income on Line 26000. You could, for example, deduct losses from previous years and an amount if you are a northern resident. The best strategy for claiming deductions of this type is to go through your income tax form line by line. We will explain these deductions and the line numbers they are seen on below.

Deductions That Reduce Income Tax

The Canada Revenue Agency allows you to deduct amounts from the tax that you owe based on your taxable income. These calculations are carried out in Section 5 of the tax return (formerly Schedule 1) and known as Non-Refundable Tax Credits or NRTCs. There are Federal Non-Refundable Tax Credits and Provincial and Territorial Credits specific to the province you resided in on December 31^st of the tax year.

Non-refundable vs. Refundable

Tax deductions that reduce your taxable income, or amounts you can subtract from your tax due, are known as non-refundable. This means you can use the deductions to reduce your tax payable to zero, but you can’t claim a refund based on these amounts.

Refundable tax credits, as the name suggests, result in a refund. Normally, you have already paid some income tax, either through salary deductions or via installments paid during the year.

To these amounts, you can add any overpayments you made on Employment Insurance (EI) or the Canada Pension Plan (CPP).

The Canada Workers Benefit (CWB), (formerly the Working Income Tax Benefit or WITB) is an example of a refundable tax credit. When the total of these amounts is more than the amount of tax due, or if there is no tax due because the deductions have reduced it to zero, you could receive a refund.

What Can You Claim On Your Tax Return?

The following list explains the deductions and credits available, and where they are entered on your Income Tax and Benefit Return:

• Registered Pension Plan (RPP) – Line 20700: If you contribute to a Registered Pension Plan through your employer, your employee contributions are deducted here.
• Registered Retirement Savings Plan (RRSP) Deduction – Line 20800: Contributions you have made to your own or a spousal RRSP are deducted here.
• Deduction for an Elected Split-Pension Amount – Line 21000: If you Split Your Pension with your spouse, a deduction is made here.
• Union, Professional, or Like Dues – Line 21200: If you paid Union Dues or Fees related to your employment, you can claim a deduction for them.
• Child Care Expenses – Line 21400: If you incurred Child Care Expenses for the purpose of earning a living or going to school, you may be eligible to claim them.
• Disability Supports Deduction – Line 21500: If you have an impairment in physical or mental functions, you may be able to deduct the expenses that you paid in the year so that you could work, go to school or do research for which you received a grant.
• Business Investment Loss (ABIL) – Lines 21699 and 21700: A Business Investment Loss is a specific type of loss that can occur when you sell or get rid of shares in a small business corporation, or when a debt is owed to you by a small business corporation.
• Moving Expenses – Line 21900: If you moved more than 40 kms for work or to attend school, you may be able to claim Moving Expenses.
• Support Payments Made – Lines 21999 and 22000: If you made Child or Spousal Support Payments, you report the non-taxable and taxable amounts on these lines.
• Exploration and Development Expenses – Line 22400: Claim this amount if you invested in petroleum, natural gas, mining, or certain clean energy generation and energy conservation ventures.
• Other Employment Expenses – Line 22900: Certain employees are required to pay their own expenses and receive a T2200 – Declaration of Conditions of Employment form or incur expenses as Transport Employees can claim a deduction here.
• Clergy Residence Deduction – Line 23100: If you receive a Clergyman’s Housing Allowance as income, you may be able to offset it by claiming this deduction.
• Other Deductions – Line 23200: Amounts not deducted elsewhere on the return are claimed here, including some Legal Fees.
• Canadian Forces Personnel and Police Deduction – Line 24400: Certain members of the Canadian Forces and Canadian Police Services, deployed outside Canada on high-risk or current moderate-risk operational missions can claim this deduction.
• Security Options Deductions – Line 24900: If your employer offers you stocks or stock options as a benefit of employment, you may be able to claim a deduction here.
• Limited Partnership Losses of Other Years – Line 25100: If you had limited partnership losses in previous years that you have not already claimed, you may be able to claim part of those losses here.
• Non-Capital Losses of Other Years – Line 25200: If you incurred a Non-Capital Loss from employment, property or a business, claim the deduction here.
• Net- Capital Losses of Other Years – Line 25300: If you have Capital Gains reported in the current year, you can claim a Net-Capital Loss you have carried forward here.
• Capital Gains Deduction – Line 25400: If you have capital gains arising from the disposition of certain properties, you may be eligible for the cumulative Capital Gains Deduction.
• Northern Residents Deductions – Line 25500: If you lived in a prescribed northern zone for a continuous period, you may be eligible to claim the Northern Residents Deduction or NRD.
• Carrying Charges and Interest Expenses – Line 22100: Certain Investment Carrying Charges, Interest Expenses and Legal Fees may qualify for a deduction here.

Non-Refundable Tax Credits

• Basic Personal Amount (BPA) – Line 30000  Every taxpayer can claim this amount which is often called the “Personal Exemption”.
• Age Amount – Line 30100: Claim if you were 65 years of age or older on December 31^st.
• Spouse or Common-law Partner Amount – Line 30300: If you had a spouse or common-law partner in the year and their income was less than the Basic Personal Amount, you can claim this amount.
• Amount for an Eligible Dependant – Line 30400: This credit is for single adults who are not claiming the spouse/common-law partner credit and who are responsible for the financial care of a relative, usually their child. Other situations do apply and more details can be found here.
• Canada Caregiver Credit or Amount: The Canada Caregiver Credit is claimed on the following three lines, depending on who you are claiming it for.
  • For Spouse or Common-law Partner, or Eligible Dependant Age 18 or Older – Line 30425
  • For Other Infirm Dependants Age 18 or Older – Line 30450
  • For Infirm Children Under 18 Years of Age – Line 30500
• Volunteer Firefighters’ Amount – Line 31220 and Search and Rescue Volunteers’ Amount – Line 31240: If you volunteered as a firefighter, or search and rescue team member, you may be eligible to claim your hours of service.
• The Home Buyers Amount – Line 31270: If you purchased a new home during the year, you may qualify for this credit.
• Home Accessibility Expenses – Line 31285: Renovations that make homes safer or more accessible for seniors or the disabled may qualify for the Home Accessibility Tax Credit (HATC).
• Adoption Expenses – Line 31300: The adoption of a child who is under 18 years of age may incur Eligible Adoption Expenses which are claimed here.
• Disability Amount for Self – Line 31600: Claim if you qualify for and have been approved for the Disability Tax Credit (DTC) for yourself.
• Disability Amount Transferred from a Dependant – Line 31800: If have a dependant who is able to claim the Disability Tax Credit (DTC) and does not need to claim all or part of that amount on their tax return. you may be able to claim all or part of their disability amount on your tax return.
• Interest Paid on your Student Loans – Line 31900: You may be eligible to claim an amount for the interest paid on your student loan in the tax year or the preceding 5 years.
• Tuition, Education, and Textbook Amounts – Line 32300: Claim on this line any Tuition and Education Credits you may have incurred in the tax year.
• Tuition Amounts Transferred From a Child – Line 32400: Your child or grandchild may be able to transfer their unused Tuition Amounts to you.
• Eligible Medical Expenses – Lines 33099 and 33199: You may be able to claim Medical Expenses for yourself and family members.
• Donations and Gifts – Line 34900: Eligible Charitable Donations and Gifts can be claimed here.
• Provincial or Territorial Tax Credits: Each province or territory offers different credits for that province. These are based on the province you resided in on December 31^st of the tax year.

This list may seem exhaustive and overwhelming trying to ensure you have your credits or deductions entered on the right line, in the right section, or even if you are eligible to claim it! But when you use a software program like TurboTax, you can be confident that you are getting the credits you are entitled to and they are entered correctly by simply going through our EasyStep Interview.

Why not answer a few simple questions on our product recommender and we can help guide you to the right edition that will reflect your individual circumstances.

You can always start your return in TurboTax Free, and if you feel the need for additional assistance, you can upgrade to any of our paid editions or get live help from an expert with our Assist & Review or Full Service*. But don’t worry, while using the online version of the software when you choose to upgrade, your information is instantly carried over so you can pick up right where you left off.

*TurboTax Live™ Full Service is not available in Quebec.