DEDUCTIONS

A deduction reduces income before tax is calculated. Deductions on lines 20600 to 23500 reduce total income to net income (line 23600); deductions on lines 24400 to 25600 reduce net income to taxable income (line 26000). Because a deduction comes off the top of income, its value equals the taxpayer's marginal tax rate: the higher the income, the more a deduction is worth. Deductions on the first group of lines also lower net income, which can increase income-tested benefits and credits.

GENERAL PRINCIPLES

• A deduction is allowed only if a specific provision of the Income Tax Act permits it.

• Most deductions require that the amount was paid in the year, and receipts must be kept.

• Some deductions can be carried forward if they exceed the income they may be applied against, such as moving expenses, RRSP contributions and losses.

• Some deductions are optional in timing: RRSP and FHSA contributions can be deducted in a later year when income is higher.

PAGES IN THIS SECTION

• RRSP Deduction: line 20800, the most widely used deduction.

• FHSA Deduction: line 20805, for first-time home buyers.

• Union and Professional Dues: line 21200.

• Child Care Expenses: line 21400.

• Moving Expenses: line 21900.

• Support Payments: line 22000.

• Carrying Charges and Interest: line 22100.

• CPP and QPP Deductions: lines 22200 and 22215.

• Employment Expenses: line 22900.

• Northern Residents Deductions: line 25500.

• Loss Carryovers: lines 25200 and 25300.

OTHER DEDUCTIONS

• Line 20700: registered pension plan contributions (box 20 of the T4).

• Line 21000: deduction for the elected split-pension amount (by the transferring spouse).

• Line 21500: disability supports deduction for attendant care, sign-language interpretation, and other prescribed devices that enable work or study.

• Line 21700: allowable business investment loss on shares or debt of a small business corporation.

• Line 23200: other deductions, including repayments of benefits and legal fees to collect support.

• Line 24400: Canadian Armed Forces and police deduction for high-risk missions.

• Line 24900: security options deductions.

• Line 25000: other payments deduction for workers' compensation, social assistance and net federal supplements.

• Line 25400: capital gains deduction (lifetime capital gains exemption).