THE GLOSSARY · TAX
Credit or deduction
$1,000 as a deduction and $1,000 as a credit are not worth the same — unless you are in the first bracket. Above it, the gap is exactly your marginal rate minus 14%.
Both reduce your tax, and that is where the confusion starts. A deduction reduces your taxable income; a credit reduces the tax itself. They act at different points in the calculation, so they are not worth the same.
A deduction saves you at your marginal rate: it removes the last dollar taxed, the most expensive one. A non-refundable tax credit is worked out at the rate of the first bracket — 14% federally in 2026 — whatever your income.
| Your marginal rate | $1,000 as a deduction | $1,000 as a credit | Gap |
|---|---|---|---|
| 14% | $140 | $140 | $0 |
| 20.5% | $205 | $140 | +$65 |
| 26% | $260 | $140 | +$120 |
| 33% | $330 | $140 | +$190 |
The gap is one subtraction: (your marginal rate − 14%) × the amount. In the first bracket it is zero, and the two instruments are identical. That is deliberate: the credit is designed to give everyone the same relief, independent of income.
Two details. Your provincial tax applies its own credits at its own rates: the 14% above is only the federal half. And a temporary measure, running from 2025 to 2030, keeps a 15% rate on the part of the amounts above the first bracket threshold — it affects fewer than 0.3% of filers.
A refundable credit, finally, is something else again: it pays you the difference even when your tax reaches zero. The non-refundable kind stops there.
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