General information only — not financial advice for your situation.
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Plain English
An amount that reduces the income the government taxes you on, before your tax rate is applied. The higher your tax bracket, the more a deduction saves you.
Technical definition
A deduction reduces taxable income before tax rates are applied. The tax savings equal the deduction amount multiplied by the taxpayer's marginal rate. Common deductions include RRSP contributions, union dues, and child-care expenses. Deductions are more valuable to higher-income taxpayers because of higher marginal rates.
Examples
- • A $10,000 RRSP deduction at a 29.65% combined marginal rate saves $2,965 in tax. The same $10,000 deduction at a 48.35% rate saves $4,835.
- • You earn $70,000 and contribute $5,000 to your RRSP. Your taxable income drops to $65,000, saving you about $1,482.
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About this site
Every number on this site is sourced from CRA publications, the Income Tax Act, or provincial fiscal releases. We show the math, cite the sources, and never tell you what to do with your money.