Deductions and credits most newcomers miss

When you file your Canadian tax return, claiming the right deductions and credits can save you hundreds or thousands of dollars. Many newcomers, international students, and families miss out on substantial tax relief because they do not know what qualifies—or they claim the expenses without keeping the receipts the Canada Revenue Agency (CRA) demands. This guide walks you through the main deductions and credits that most newcomers overlook and shows you how to claim them properly.

Registered Retirement Savings Plan (RRSP) Contributions: Direct Deductions from Income

One of the most powerful tax tools available to Canadian residents is the RRSP. Unlike a tax credit, which reduces tax owed after it is calculated, RRSP contributions are deducted directly from your taxable income. This means a $5,000 RRSP contribution lowers the income on which you owe tax, not just the tax amount itself.

How RRSP Deduction Limits Work

Your RRSP deduction limit is the maximum you can claim. It is calculated as the lesser of 18 percent of your previous year's earned income or an annual maximum set by the government (which is $33,810 for the 2026 tax year). You can check your deduction limit on your Notice of Assessment from the CRA, in your CRA My Account online, or by calling the CRA at 1-800-267-6999.

A critical point for newcomers: if you do not use your full deduction limit in one year, you do not lose it. Unused amounts carry forward indefinitely, so you can contribute and claim them in future years when your income may be higher and the deduction is worth more. You have until 60 days after the end of the calendar year (typically early March) to make contributions for the previous tax year.

Contribution Limits vs. Deduction Limits

There is an important difference between how much you can contribute to an RRSP and how much you can deduct. The CRA allows you to over-contribute by $2,000 without penalty, but amounts above $2,000 over your deduction limit are subject to a 1 percent monthly tax. If you accidentally over-contribute beyond this buffer, you can request the CRA to return the excess to you.

Tuition Credits (T2202): Carry Them Forward Indefinitely

If you are a student or your child attends university or college in Canada, the T2202 Tuition and Enrolment Certificate is your key to a federal tax credit. Your educational institution must issue you a T2202 if you paid more than $100 in eligible tuition fees. Schools typically issue these by the end of February through your student portal.

Understanding the Credit vs. a Deduction

Tuition is a non-refundable credit, not a deduction. A credit reduces tax owed after it is calculated, whereas a deduction reduces your income. The federal tuition credit is worth 15 percent of eligible fees shown in box 23 of the T2202. Your province may add another 5 to 10 percent, depending on where you live (though Ontario, Alberta, and Saskatchewan have eliminated provincial tuition credits on new claims). You claim tuition on Schedule 11 of your federal tax return.

Transfer and Carry-Forward Rules

If your tuition credit is larger than your tax owing in a given year, you have two options. First, you can transfer up to $5,000 of the current year's eligible tuition fees (not the credit value) to a spouse, parent, grandparent, or common-law partner. That family member uses the transfer to reduce their own tax. Second, any unused portion carries forward indefinitely with no time limit.

A critical mistake many students and parents make: the CRA requires you to file a tax return every year to preserve your carry-forward amount. If you skip a year between earning the credit and the year you want to use it, the credit is lost. Even if you earn little or no income, filing keeps your tuition credits alive and may also give you access to government benefits like the GST/HST credit.

Childcare Expenses: A Deduction That Reduces Taxable Income

Childcare expenses are a deduction, meaning they lower your taxable income. This makes them more powerful than a credit. You can claim the costs you paid for someone else to care for your eligible child so that you could earn income, attend school, or conduct research. The expense must be for care provided in Canada by a Canadian resident.

Eligible Expenses and Limits

Eligible childcare expenses include daycare fees, nanny wages, babysitting costs, and overnight camp fees. What is not eligible: school tuition, music or sports lessons, tutoring, medical or dental expenses, clothing, and payments to the child's parent. The deduction cannot exceed two-thirds of your earned income for the year. You must have receipts showing the provider's name, address, and Social Insurance Number (SIN) if an individual provided the service.

The maximum you can claim depends on your child's age and whether they have a disability. For example, parents can claim up to $8,000 per child under age seven and $5,000 per child age seven to sixteen (2025 limits, indexed annually). If both parents work, generally the lower-income parent claims the deduction, although in some cases the higher-income parent may claim part of it.

How to Claim

Complete Form T778 to calculate your allowable deduction. You do not send receipts with your return, but you must keep them for at least six years in case the CRA requests verification. Enter the final deduction amount on line 21400 of your T1 personal income tax return. If you file electronically, you do not need to file the form—just enter the amount—but still keep the receipts.

Medical and Disability-Related Expenses: A Non-Refundable Tax Credit

You can claim a non-refundable medical expense tax credit for eligible health costs that were not covered by another health insurance plan. To qualify, your total eligible medical expenses must exceed the lesser of 3 percent of your net income or $2,833 (for 2025; this threshold is indexed annually). You can claim expenses for yourself, your spouse or common-law partner, and certain dependants.

What Qualifies as an Eligible Medical Expense

The eligible list includes prescribed medications (over-the-counter drugs do not qualify unless specifically prescribed), prescription glasses and contact lenses, dental services and dentures, hearing aids, orthodontics, physiotherapy, chiropractors, and registered psychologists. You can also claim travel expenses for medical treatment in some cases, as well as costs for home accessibility renovations for persons with disabilities.

What is not eligible: cosmetic surgery (unless medically required), over-the-counter vitamins and supplements, general gym memberships, and health club fees. Note that the rules are detailed and technical. A common mistake is assuming any health-related expense qualifies simply because it is medically necessary. Before claiming significant medical costs, check the CRA's list of eligible medical expenses or consult a tax professional.

Claiming Periods and Carry-Forward

You can claim medical expenses for any 12-month period ending in the tax year you file. If you have expenses that were not claimed in a previous year, they can be carried forward and claimed in the following year. This flexibility helps if you did not have enough expenses to benefit from the credit in the year they were incurred. You claim medical expenses on lines 33099 or 33199 of your tax return and must keep all receipts showing the provider's name and address.

Provincial and Territorial Tax Credits: Know What Your Province Offers

While federal deductions and credits apply to all Canadian residents, each province and territory sets its own tax rates, brackets, and credits. Your provincial credits may be very different from your neighbour's in another province. Most of Canada's provinces and territories allow the CRA to collect and administer income tax on their behalf, except Quebec, which has its own tax administration (Revenu Québec).

Provincial Variations in Key Credits

Ontario, Saskatchewan, and Alberta have eliminated provincial tuition tax credits on new claims, though residents of other provinces still receive provincial tuition credits. Quebec offers a refundable childcare expense credit (not a deduction like the federal claim), which can be more valuable for some families. Some provinces, such as Ontario, British Columbia, and Quebec, offer additional childcare or low-income credits with varying generosity.

Different provinces also have different thresholds and structures for medical expense credits. For example, Quebec allows a refundable credit for certain medical expenses at a rate of 25 percent with no minimum threshold if you have eligible work income. The federal system requires expenses to exceed the 3 percent threshold before any benefit applies.

How Tax Software Handles Provincial Credits

Most Canadian tax software (such as TurboTax, UFile, or StudioTax) automatically applies your province's credits based on your province of residence on December 31 of the tax year. When you enter your personal information and select your province, the software calculates both federal and provincial tax, including all applicable credits. However, you must be aware of which province you claim residency in, as your address on December 31 determines your provincial tax rate and available credits.

Documentation and Record Keeping

Across all deductions and credits, the CRA's rule is consistent: you must keep receipts and supporting documentation for at least six years. The CRA does not require you to submit receipts with your return, but they have the authority to request them at any time. Keeping organized records from the start of each tax year saves you from scrambling later.

For RRSP contributions, retain your RRSP receipts from your financial institution. For tuition, keep your T2202 and any proof of payment. For childcare, save provider invoices showing their name, address, and SIN. For medical expenses, maintain itemized receipts from healthcare providers. Photograph or scan key documents, and store copies in a safe place—physical paper and digital backups are both wise.

Getting Help and Double-Checking Your Return

If you are unsure whether an expense qualifies, check the CRA's official website (canada.ca) for detailed guidance on each deduction and credit. You can also call the CRA at 1-800-959-8281 (RRSP questions) or 1-800-267-6999 (general tax inquiries) to speak with a representative. Many newcomers also benefit from consulting a Canadian tax accountant or using reputable community settlement services, which often offer free or low-cost tax clinic support.

Taking the time to understand these deductions and credits and to gather your receipts each year will pay real dividends. The difference between filing a basic return and claiming everything you are entitled to can mean hundreds or thousands of dollars in tax relief. As you build your life in Canada, make receipt management and annual tax review part of your routine—it is one of the simplest ways to keep more of what you earn.