8.3 Reducing your taxes

In this section:

Introduction

Someone tells a teller to deposit her money in an RRSP.

Income tax is based on your taxable income, not your total income. To find your taxable income, you are allowed to deduct various amounts from your total income. Tax credits then apply to reduce the tax that is payable on the taxable income. This section outlines the main types of deductions from income. You will explore:

  • amounts that people in certain groups are allowed to deduct from the income they report
  • how registered savings plans can help you protect income from taxation
  • various credits that people can use to reduce the taxes that they would have to pay.

You'll review some information about various tax deductions and view a video describing tax-sheltered savings. You'll use a calculator to see how much a Registered Retirement Savings Plan can save you in taxes, and look at some tax-saving examples. By the time you finish this section, you'll be able to describe how tax deductions and credits reduce the income tax you pay.

The next sections describe how income tax deductions and credits are treated using Canada's federal T1 tax return.

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