Tax Planning
Navigating Canada’s New Personal Support Workers Tax Credit
Discover how Canada’s proposed Personal Support Workers Tax Credit could benefit eligible caregivers, what qualifies, and how to plan ahead if you’re working in this crucial sector.
By NomadicTax Research Team • 5-8 min read • November 21, 2025
## What is the PSW Tax Credit?
The **Personal Support Workers Tax Credit** is a **refundable tax credit** proposed in **Budget 2025** by the Government of Canada. It aims to support eligible personal support workers (PSWs) earning income in provinces or territories that **do not have bilateral wage agreements** with the federal government to increase PSW wages. Under the proposal, eligible PSWs may claim **5% of eligible earnings**, up to **$1,100 per year**. The credit would apply for the **2026–2030 taxation years**. ([budget.canada.ca](https://www.budget.canada.ca/2025/report-rapport/tm-mf-en.html?utm_source=openai))
## Who Qualifies as a Personal Support Worker?
Eligible PSWs must meet the following criteria:
- Provide **one-on-one care** including essential support for health, safety, mobility and daily living tasks. Duties must follow direction from regulated health care professionals or provincially recognized community health organizations. ([budget.canada.ca](https://www.budget.canada.ca/2025/report-rapport/tm-mf-en.html?utm_source=openai))
- Main duties include **helping patients with activities of daily living** and mobilization. ([budget.canada.ca](https://www.budget.canada.ca/2025/report-rapport/tm-mf-en.html?utm_source=openai))
- Must be employed by a **regulated health care establishment**, such as hospitals, nursing care facilities, residential care, community care for the elderly, home health care, etc. ([budget.canada.ca](https://www.budget.canada.ca/2025/report-rapport/tm-mf-en.html?utm_source=openai))
- Workers in **British Columbia, Newfoundland and Labrador, and the Northwest Territories** are **excluded** because these jurisdictions already have agreements with the federal government to raise PSW wages. ([budget.canada.ca](https://www.budget.canada.ca/2025/report-rapport/tm-mf-en.html?utm_source=openai))
## Example Scenarios
**Scenario 1**: Sarah works in a home health care facility in Alberta earning $20,000 in eligible PSW income in 2027. She qualifies. Her credit would be 5% × $20,000 = **$1,000**, which is under the $1,100 cap.
**Scenario 2**: John works in a community care facility in British Columbia earning $25,000. He’s in a jurisdiction with a bilateral agreement, so he’s **not eligible** for this federal credit.
## Actionable Advice & Planning Tips
- If you are a PSW in a province **without** an existing agreement, keep detailed records of your income, paystubs, and work duties to confirm eligibility.
- Check whether your employer qualifies as a regulated health care establishment as defined in the legislation.
- Monitor CRA guidance to understand how to certify eligible earnings (employer certification likely required).
- Estimate your income for 2026 vs. credit cap of **$1,100** to see if the credit will fully benefit you.
## What Remains Unclear: Areas to Watch
- How CRA will define **“main duties include helping with daily living”** and whether part-time workers qualify.
- What counts as a “regulated health care establishment” in smaller or mixed-service settings.
- Whether contract or self-employed PSWs are covered (likely only employees, given eligible earnings reference).
- Timing: though law is proposed, must pass legislation and regulations before becoming effective.
If you are a caregiver or PSW, this tax credit offers meaningful relief, but careful documentation and advance planning are essential to maximize your benefit. Stay tuned to CRA and provincial announcements as regulations are finalized.