Tax Deductions & Credits

The difference between tax deductions & credits and whats eligible.

Although there’s a substantial difference between a tax credit and a tax deduction, it’s easy to get the two confused. A tax deduction reduces your taxable income, with the actual amount of tax saved depending on your personal marginal rate of tax.

tax deductions & creditsA tax credit, on the other hand, is a deduction from tax owing. Provided the credit can be used, each taxpayer receives the same tax relief with a tax credit regardless of his or her particular tax bracket.

The provinces are free to either follow the federal tax credit system or introduce tax credits that are unique to the particular province. In many cases, the amount of the provincial credit will differ from its federal counterpart.

The tax credit sections that follow generally just comment on the federal tax credit. For 2015, federal personal tax credits are calculated as 15% of specified “personal amounts” and are allowed as a deduction in calculating your federal tax liability. Keep in mind that the provincial tax credits may or may not parallel the treatment provided at the federal level.

If you pay the following expenses by December 31, 2015 they will be eligible for the deductions of credits:

Childcare expenses, Deductible support payments, Charitable donations, Union and professional dues, Moving expenses, Political donations, Accounting fees, Medical expenses, Investment counsel fees, Interest paid on loans used purchase investments, Tuition fees, Children’s artistic, cultural, recreational or developmental fees.

See Other guides, schedules and forms you may need to complete your income tax and benefit return.

Leave a Reply

Your email address will not be published. Required fields are marked *