Tax Guide/How tax works
Tax deductions vs. tax credits
Updated November 4, 2026
A deduction lowers the income you are taxed on. Its value depends on your marginal rate.
A $1,000 deduction saves about $430 at a 43% combined rate, and about $200 at a 20% combined rate.
A credit lowers your tax directly. Most federal credits are worth the lowest tax rate, which is 14% in 2026, no matter how much you earn.
A $1,000 federal credit amount saves $140, plus any provincial credit.
Refundable or non-refundable
A non-refundable credit can reduce your tax to zero but cannot create a refund. A refundable credit can pay you even if you owe no tax. See benefits and refundable credits.