What is the difference between a tax credit and a tax deduction?

A tax deduction saves tax at your marginal tax rate. Your marginal tax rate is the amount of tax you pay on the next dollar of income.

A tax credit saves tax at the lowest tax rate.

For example, how much tax would be saved with a $1,000 tax deduction vs. a $1,000 tax credit (using Ontario 2014 tax rates, including surtax)?

Taxable Income Deduction Credit

$45,000

$310

$200

$78,000

$330

$210

$88,000

$430

$230

$137,000

$460

$230

Typical tax deductions include RRSP contributions, moving expenses, union and professional dues, employment expenses and childcare deductions.

Typical tax credits include tuition and education amounts, first time home buyers plan, child fitness and child arts credit, medical expenses, student loan interest credit and public transit amount.

Please contact our office if you have questions about what deductions or credits you may be entitled to.

You May Also like

Pay Less Tax

A great small business tax accountant does more than just measure value, they create it. At CPA4IT our goal is to save you substantially more than it costs you for our services. Over the last 30 years we have developed tax strategies designed to help you keep more of your hard earned money. If you would like to learn how we can help you pay less tax, simply download our FREE Guide to Pay Less Tax.

Book A Free Consultation

Got questions? We’ve got answers! Use the link below to book a time to chat with one of our experts.

Pay Less Tax

A great small business tax accountant does more than just measure value, they create it. At CPA4IT our goal is to save you substantially more than it costs you for our services. Over the last 30 years we have developed tax strategies designed to help you keep more of your hard earned money. If you would like to learn how we can help you pay less tax, simply download our FREE Guide to Pay Less Tax.