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Tip of the Week: Tax Deductions and Credits

On the T1 tax return, two areas increase your taxes payment or refund, a tax deduction and a tax credit.

The tax deduction is your best option as it reduces the income that you pay tax on. Examples are RRSP contributions and employment expenses.

Tax deductions reduce the amount of tax that you pay on your income. Examples are school tuition credits and a first time homebuyer credit.

The first time homebuyer is a $5,000 credit, which translates into $750 improvement on your return.

A $5,000 RRSP contribution lowers your income by $5,000, so for someone who may be in the 39% tax bracket, this would make your tax return nearly $2,000 better!

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