Taxes 101 - What is a Tax Credit?

Geoff Cook - CFP, CHAIP

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Last time we talked about tax deductions. The next important piece to understand is tax credits. There is a couple more moving parts to a tax credit, but it is still simple to understand.

What is a Tax Credit?

A tax credit is an amount of money that will be returned to you based on the specific credit.

A tax deduction reduces taxes payable. A tax credit is money in your pocket.

For example with a “Tuition Tax Credit” the amount is 15%. This means that if I spend $1000 in tuition, I will receive $150 off my tax bill.

Not to add a level of confusion but...There is two types of a tax credit;

Non-Refundable Tax Credit: These become worthless once your taxes owing become nil. In other words you won’t get money back as a refund solely because of these.

Non-Refund Tax Credit Examples;

- Child Tax Credit
- Adoption Expense Tax Credit
- Tuition Fee Tax Credit
- Textbook Tax Credit
- Medical Expense Tax Credit

Refundable Tax Credit : These credits are always worth to you what they say they are worth. And can provide a refund. In other words - they can take your income below $0. (there is not as many of these available)

Refundable Tax Credit Examples;

- Dividend Tax Credit
- Labour Sponsored Funds and certain investments
- Political Contribution Credit

To learn more about the tax credits available in your province click here


When dealing in financial matters, you are urged to consult an advisor for legal, tax or investment advice. Every effort has been made to present information in a clear, exacting manner. However neither the publisher nor the authors can be held responsible for any losses incurred due to the actions of any individual as the result of this post or any errors or omissions contained herein. 

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