Tax Planning
Essential Guide to Canada’s New Personal Support Workers Tax Credit
Budget 2025 introduces a temporary tax credit to support personal support workers — here’s how to qualify, what it’s worth, and how this will affect your tax planning.
By NomadicTax Research Team • 5-8 min read • November 22, 2025
## What is the Personal Support Workers Tax Credit?
Budget 2025 proposes a **temporary five-year refundable tax credit** specifically for **personal support workers (PSWs)** in eligible health care establishments. It would allow qualifying PSWs to claim **5 % of their eligible earnings**, up to **$1,100 annually**. ([canada.ca](https://www.canada.ca/en/department-finance/news/2025/10/budget-2025-to-invest-in-canadian-workers.html?utm_source=openai))
## Who qualifies and for which provinces?
To be eligible, individuals must be employed in health care establishments not covered by existing federal–province wage-increase agreements for PSWs (such as BC, Newfoundland & Labrador, and Northwest Territories) ([canada.ca](https://www.canada.ca/en/department-finance/news/2025/10/budget-2025-to-invest-in-canadian-workers.html?utm_source=openai)). Eligible health care settings include hospitals, nursing care facilities, residential care, home health care, and community care for elderly persons. PSWs must perform one-on-one care duties: assisting with **activities of daily living and mobilization**, as directed by a regulated health professional or comparable organization. ([budget.canada.ca](https://www.budget.canada.ca/2025/report-rapport/tm-mf-en.html?utm_source=openai))
## When does this apply?
- The credit is proposed for **taxation years 2026 through 2030**. ([canada.ca](https://www.canada.ca/en/department-finance/news/2025/10/budget-2025-to-invest-in-canadian-workers.html?utm_source=openai))
- Legislation (Notice of Ways and Means Motion) would amend the Income Tax Act accordingly once passed. ([budget.canada.ca](https://www.budget.canada.ca/2025/report-rapport/nwmm-amvm-1-en.html?utm_source=openai))
## How much can you save?
Here’s a quick breakdown if you’re potentially eligible:
| Annual PSW income | 5% Credit Rate | Credit Amount | Conditions |
|---|---|---|---|
| $15,000 | 5% | $750 | Must be eligible establishment & duties |
| $22,000 | 5% | **$1,100** (cap) | Maximum credit reached |
| $25,000 | 5% | $1,100 | Same cap applies |
The credit is **refundable**, meaning even if you owe little or no federal tax, you can still receive or carry forward the full amount. ([budget.canada.ca](https://www.budget.canada.ca/2025/report-rapport/tm-mf-en.html?utm_source=openai))
## Tax Planning Tips and Challenges
- **Timing**: Since this applies starting in 2026, PSWs should ensure excellent record-keeping for eligible earnings during the relevant years. Keep employer certifications if required. ([budget.canada.ca](https://www.budget.canada.ca/2025/report-rapport/nwmm-amvm-1-en.html?utm_source=openai))
- **Income & Location Matters**: If your province has a federal wage-increase agreement, you might not qualify. Double-check your provincial status.
- **Refundability**: Because the credit is refundable, even low-income workers will benefit — unlike non-refundable credits.
- **Tax Return Preparation**: You'll likely need to claim this on your annual return; ensure forms include sections for this new credit. Keep documentation of employment and duties.
## Example Scenario
Sara works in a home care setting in Ontario, not under a federal agreement, as a PSW. In 2026 she earns $24,000 in eligible earnings. She’s eligible, so she gets **5% × $24,000 = $1,200**, but since the credit caps at **$1,100**, she receives $1,100. Even though she has $800 of tax payable, she gets the full $1,100 refund or offset. If she owed $0, she still receives the full credit as a refund.
## What’s Next? Legislative Status
At Budget Day (November 4, 2025), the measure was **proposed** via a **Notice of Ways and Means Motion** to amend the Income Tax Act and Regulations. It remains **pending legislation**. ([budget.canada.ca](https://www.budget.canada.ca/2025/report-rapport/nwmm-amvm-1-en.html?utm_source=openai))
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If you're a personal support worker or considering that career path, this is a big change. When the legislation is passed, you may be able to use this credit retroactively for taxation years 2026-2030. Be ready with records, know your province’s status, and consult a tax professional to incorporate this into your tax plans effectively.