July 10, 2023

Personal Taxes - Credits & Deductions

What goes into a Canadian personal tax return?

A Canadian personal tax return requires various pieces of information to accurately report your income, deductions, and credits. Information included:

  1. Personal Information: This includes your name, address, social insurance number (SIN), marital status and contact details.
  2. Income: You’ll need to report all sources of income, such as employment income (T4 slips), self-employment income (T2125 form), investment income (T5 slips), rental income, and any other income earned.
  3. Capital Gains and Losses: If you sold investments, real estate, or other assets during the year, you’ll need to report any capital gains or losses.
  4. Deductions and Credits: You’ll need to provide information about any deductions and credits you’re eligible for, such as contributions to RRSPs, medical expenses, tuition fees, Northern Residents Deduction, and charitable donations. Depending on your situation, you may need to fill out additional schedules or forms. Your tax preparer will do this with the information you provide them.

What is the difference between deductions and credits?

Deductions and credits are both ways to reduce your taxes, but they work differently:

Deductions: Deductions are expenses that reduce the amount of income you are being taxed on.

Credits: Tax credits are subtracted directly from the total amount of tax you owe. For example, if you owe $6,000 in taxes and have a $1,000 tax credit, your taxes owing would be reduced to $5,000. Credits can be refundable or non-refundable. Refundable credits can result in a refund if they exceed your taxes owing, while non-refundable credits can only reduce your tax owing to zero and will not push you into a refundable position.

In summary, deductions lower your taxable income, while credits directly reduce the amount of tax you owe. Both reduce your overall tax burden.


It’s important to note that deductions and credits have specific eligibility criteria and limitations, such as a certain income threshold, income limits or a specific purpose for the expense. For example, child care expenses are claimed by the lower earner in a couple. If the lower earner’s income is $0, the child care expenses cannot be claimed.

Tax returns will differ person-to-person and year-to-year because of family changes (marital status or growing families), income changes, moving and many other factors that effect personal tax returns. The CRA can also make changes to amounts and types of credits and deductions. You may have received a credit in the past that you can no longer receive or no longer qualify for.

If you have specific questions about deductions and credits and if they apply to your situation, it’s best to contact a tax specialist to prepare and file your personal tax returns – especially if it’s more complex! You can also refer to the guidelines provided by the CRA. The CRA provides an extensive list and outlines eligibility for deductions and credits here.

Simplify Accounting strives to minimize taxes and reduce the headache caused by tax returns. Contact us today by following this link.

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