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Deductions vs credits

It is important to know the difference between deductions and credits to be able to take advantage of an overall result of less taxation on an individuals tax return. 

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Deductions

A tax deduction will lower your taxable income. This automatically includes lowering the tax rate applied to your taxable income and can place you into a lower tax bracket.

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Examples: union dues, certain childcare expenses for children under 16, expenses related to moving over 40km for a job, RRSP contributions, etc.

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Credits

A tax credit will lower the taxes you owe. This automatically includes lowering the actual taxes that you will pay after everything has been calculated. There are two types of tax credits.

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