Personal Income Tax In Canada 2025: Claiming Deductions, Credits & Expenses

Personal Income Tax in Canada: Claiming Deductions, Credits & Expenses

Updated: June 18, 2025 | WealthFusions Tax Guide

Table of Contents

Personal Income Tax in Canada: 2025 Overview

Federal Tax Brackets

15% on income up to $53,359

20.5% on $53,360 – $106,717

26% on $106,718 – $165,430

29% on $165,431 – $235,675

33% on income above $235,675

Provincial Tax Rates (example: Ontario)

5.05% on first $49,231

9.15% on $49,232 – $98,463

11.16% on $98,464 – $150,000

12.16% on $150,001 – $220,000

13.16% on income above $220,000

Marginal Tax Rate Example

If you earn $60,000 in Ontario in 2025:

Federal tax ≈ $8,507
Provincial tax ≈ $3,127
Total ≈ $11,634 (19.4%)

Key Components of Personal Income Tax

Federal Tax: Collected by the Canada Revenue Agency (CRA)
Provincial Tax: Rates vary by province or territory
Tax Credits & Deductions: Reduce taxable income or tax owed (e.g., basic personal amount, RRSP contributions)
Payroll Deductions: Canada Pension Plan (CPP) and Employment Insurance (EI) premiums

💡 Tip: Maximize RRSP contributions to reduce taxable income and save on taxes!

Filing taxes in Canada isn’t just about reporting income — it’s your chance to save big through deductions, non-refundable credits, and eligible expenses. Whether you’re a salaried employee, student, self-employed, or newcomer, this guide will help you maximize your 2025 tax refund by identifying what you can legally claim under CRA guidelines.

1. Understand the Difference: Deductions vs Credits

Deductions: Reduce your taxable income. Example: RRSP contributions.
Non-refundable credits: Reduce your tax payable. If unused, they don’t carry forward (e.g., Basic Personal Amount).
Refundable credits: Payable to you even with zero tax owed. Example: GST/HST credit.

Tip: Deductions are more valuable for high earners, while refundable credits help lower-income households.

2. Common Deductions Canadians Can Claim

Deduction Type	2025 Limit / Condition	Who Should Claim
RRSP Contributions	18% of 2024 income, up to $31,560	Anyone saving for retirement or lowering taxable income
Union/Professional Dues	Actual paid amount (keep T4 slip or receipt)	Teachers, engineers, nurses, etc.
Childcare Expenses	Up to $8,000 per child under 7	Working parents or full-time students
Moving Expenses	If moved ≥40 km for work/school	New grads, relocations, first job
Home Office Expenses	Temporary flat rate ($2/day) or detailed	Remote workers (T2200S required)

How Personal Income Tax Is Calculated in Canada (2025)

Step 1: Calculate Your Total Income

This includes all sources of income such as employment earnings, rental income, investments, and pensions.

Step 2: Subtract Deductions

Common deductions include RRSP contributions, childcare expenses, union dues, and moving expenses.

Step 3: Determine Taxable Income

Taxable income = Total income – Deductions.

Step 4: Apply Federal and Provincial Tax Rates

Use the progressive tax brackets for both federal and provincial taxes to calculate the total tax owed.

Step 5: Apply Non-Refundable Tax Credits

These credits reduce the tax payable and include:

Basic Personal Amount (~$15,000 federally)
Canada Employment Amount
Medical Expense Tax Credit
Tuition and Education Credits
Disability Tax Credit

Step 6: Subtract Tax Credits from Tax Owed

After applying credits, the result is your net tax payable to CRA.

💡 Pro Tip: Keep all receipts and documents for deductions & credits—you need them when filing your taxes!

3. Top Tax Credits You Shouldn’t Miss

Basic Personal Amount: First $15,705 of income is tax-free federally in 2025.
Canada Caregiver Credit: Up to $7,999 for supporting a dependent with a disability.
Tuition Tax Credit: 15% of eligible tuition; carry forward unused credits.
Disability Tax Credit (DTC): Up to $9,428 federally + provincial amount.
First-Time Home Buyers’ Tax Credit: $10,000 claim = $1,500 credit.

Note: Provincial credits vary (e.g., Ontario Trillium Benefit, BC Climate Action Credit).

4. Self-Employed or Side Hustler? Don’t Miss These

If you earned income from freelancing, gig work (Uber, Etsy), or consulting:

Business-use-of-home: Deduct a portion of rent, mortgage interest, internet, utilities.
Vehicle expenses: Track mileage, gas, insurance, lease interest.
Capital cost allowance: Depreciate laptops, equipment over time.

Pro Tip: Use free apps like MileIQ or QuickBooks Self-Employed to track business expenses year-round.

5. Medical Expenses — Often Overlooked!

You can claim qualifying medical expenses that exceed the lesser of:

3% of your net income
or $2,759 (2025 threshold)

Eligible expenses include:

Dental, vision, physiotherapy
Prescription drugs
Travel for medical treatment (>40 km)
Private health insurance premiums

Tip: Combine family medical claims on the lower-income spouse’s return to maximize refund.

6. Use Tax Software to Catch Every Claim

Filing online using CRA-certified tax software (like Wealthsimple Tax, TurboTax, or StudioTax) helps auto-fill:

T4, T5, RRSP contribution slips via CRA’s Auto-Fill My Return
Pre-populates carry-forward tuition and capital losses
Alerts for missed credits

Plus, NETFILE-approved software allows instant filing and faster refunds — usually within 8 business days.

Conclusion: Don’t Leave Money on the Table

Canada’s tax system offers dozens of legal ways to reduce what you owe. Whether it’s through RRSPs, childcare, tuition, or medical expenses, claiming every deduction and credit can mean thousands back in your pocket. Stay organized, keep receipts, and use certified tax software or work with a tax professional for more complex returns.

Need help with your financial planning? Book a personal session today and we’ll help you claim every dollar you deserve.

Frequently Asked Questions

1. What’s the deadline to file 2025 taxes in Canada?: April 30, 2026. If self-employed, file by June 15, 2026, but payment is still due April 30.
2. Can I claim rent as a tax deduction?: Only in certain provinces (e.g., Ontario’s property tax/rent credit under the Trillium Benefit).
3. Are student loans tax-deductible?: Interest on federal/provincial student loans is claimable — up to 5 years of carryforward available.
4. What is Line 10100 on the tax return?: It’s where you report employment income from your T4 slip.
5. I worked from home. Can I claim anything?: Yes. Use the flat-rate method ($2/day up to $500) or the detailed method if you have Form T2200S.
6. What receipts should I keep?: RRSP slips, tuition forms (T2202), donation receipts, childcare, medical, moving, and business expenses.
7. How do I claim tuition for my child?: Tuition can be transferred to a parent (max $5,000) if the student doesn’t need the full credit.
8. Is my TFSA deductible?: No. TFSA contributions are not tax-deductible — only RRSPs reduce taxable income.