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.
