Popular Canadian tax credits and deductions to lower your 2026 tax bill

When it comes to filing your taxes, a little preparation can go a long way. With dozens of tax credits and deductions available across Canada, knowing which ones apply to you can help lower your overall tax bill. It’s one of the easiest ways to keep more of your hard-earned money in your pocket.

Here are some popular options to consider as you look for ways to maximize your 2026 tax savings.

What’s the difference between a tax deduction and a tax credit?

Both tax deductions and tax credits can help lower your final tax bill, but they work in different ways.

Tax deductions lower your taxable income, meaning less of your earnings are subject to tax, potentially pushing you into a lower tax bracket. Tax credits, on the other hand, help reduce the amount of tax you owe, lowering your tax bill.

There are two types of tax credits: refundable and non-refundable. If a tax credit is refundable, credits are paid out even if you don’t owe any income tax. Non-refundable tax credits, however, can only be used to offset income tax you owe. While non-refundable tax credits can reduce your tax bill all the way down to zero, they won’t result in a tax refund.

Popular tax deductions in Canada

There are several deductions you can take advantage of to help reduce your taxable income this year. Here are a few of the most widely used deductions in Canada.

Registered Retirement Savings Plan (RRSP) contributions

Contributing to an RRSP is one of the most common ways to reduce your taxable income. The amount you deposit can be deducted from your taxable income for the year. For example, if you earned $50,000 and contributed $5,000 to your RRSP, your taxable income would be reduced to $45,000.

However, there’s a limit on how much you can contribute each year. For 2026, the contribution limit is $33,810, or 18% of your earned income from the previous year, whichever is lower. That said, unused room carries forward, so you may be able to contribute more if you haven’t maxed out your available contribution room from previous years.

You can contribute to your RRSP at any time of the year. But the deadline to be able to apply those tax deductions to a particular year’s earnings is on or before the 60^th day after the end of that calendar year. The contribution deadline for the 2026 tax year is March 1, 2027.

First Home Savings Account (FHSA) contributions

Like an RRSP, contributions to an FHSA are deducted from your taxable income. This can help lower your overall tax bill while you save for your first home. You can contribute up to $8,000 in the year you first open the account, with a lifetime limit of $40,000. You can also carry forward up to $8,000 of unused contribution room into the next year, meaning you could contribute $16,000 in a single year.

Unlike RRSPs, your contributions must be made by December 31 to count as a deduction for that tax year. That means you’ll need to fund your account by December 31, 2026 to reduce your 2026 tax bill.  

Carrying charges and interest expenses

If you borrow money to buy investments inside a taxable account, the interest you pay on that loan can be deducted from your taxable income (as long as it’s used to generate investment income such as dividends or interest). However, if the only earnings your investment can produce are capital gains, you can’t deduct the interest you pay.

Under federal tax rules, if your interest expenses are higher than your investment income, you may be able to deduct the excess against other source of income. However, for Quebec provincial tax purposes, deductible investment expenses are generally limited to the investment income reported.

Home office expenses

If you work from home as an employee, you may be able to deduct certain workspace costs, such as your home internet, utilities and rent. To make a claim, you’ll need to complete Form T777 , and your employer will also have to fill out Form T2200.

If you’re self-employed and work from home, you can deduct certain business-use-of-home expenses, such as utilities, cleaning supplies, property taxes and mortgage interest. There are certain conditions, so it’s important to check your eligibility. To make a claim, you’ll need to fill out Form T2125.

Child care expenses

As a parent, you may be able to deduct child care expenses from your taxable income, including costs for daycare, camps, sports programs and boarding schools. This can help ease some of the everyday costs of raising a family. Generally, the parent with a lower net income claims these expenses, though there are some exceptions. To make a claim, you’ll need to fill out Form T778. 

Moving expenses

If you moved at least 40 kilometres closer to a new job or to attend post-secondary studies full-time, you may be able to claim eligible moving expenses as a tax deduction. To make a claim, you’ll need to complete Form T1-M when filing your taxes.

Popular tax credits in Canada

There are dozens of tax credits designed to help lower the tax you pay, from medical expenses to incentives for first-time homebuyers. Here are a few common ones that might apply to you.

Home buyers’ amount

If you bought your first home in 2026, you may qualify for the home buyers’ amount. It’s a non-refundable tax credit that can help offset some of your purchase costs. You could get up to $1,400.

Canada Workers Benefit (CWB)

If you have a modest income, you may qualify for the Canada workers benefit, which replaced the Working Income Tax Benefit. It’s a refundable tax credit that offers financial relief to lower-income working Canadians. What you can claim depends on your adjusted net income and the province or territory you live in.

Multigenerational Home Renovation Tax Credit (MHRTC)

If you renovated your home to build a secondary unit for a senior or an adult with a disability, you could receive this refundable tax credit. You can claim up to 14.5% of your qualifying costs for each renovation, up to a maximum of $7,250 per claim.

Canada Training Credit

If you’re between 26 and 65 years old and spent money on training fees this year, you may qualify for this refundable tax credit. You can accumulate $250 each year, up to a lifetime limit of $5,000. You can claim your Canada Training Credit limit for the year or 50% of eligible fees, whichever is lower.

Medical Expense Tax Credit (METC)

If you paid for any medical expenses out of pocket this year, you will want to hold on to your receipts. With more than 100 expenses that qualify, you can claim some of them on your tax return with this non-refundable tax credit. Think prescription drugs, dental care, eye care and medical devices.

*The tax calculator is updated annually after Canadian income tax rates are released, which typically occurs between January and February.

The bottom line

Planning ahead can make tax season more manageable. Knowing which tax credits and deductions apply to you can help lower your tax bill and keep more of your money working for you. A financial advisor can help you explore tax-efficient strategies that support your broader financial goals.