What Is the New Tax Credit?
Announced in Budget 2025, Canada is establishing a temporary five-year Personal Support Workers Tax Credit for eligible workers. It allows claiming a refundable tax credit of 5% on eligible earnings, with a benefit of up to $1,100 per year. (canada.ca)
This credit applies from 2026 to 2030 taxation years and is available only in provinces and territories that haven’t signed a bilateral wage-increase agreement with the federal government for personal support workers. If your region already has one, you won’t be eligible under this new credit. (canada.ca)
Eligibility & How to Apply
- You must be classified as a personal support worker (PSW) under relevant employment legislation or recognized criteria.
- Eligible earnings are those from PSW duties—includes both wages and other compensation formally reported on your T-4 or equivalent.
- Refundable means you get the credit even if you owe little or no federal tax.
To claim, filing a personal income tax return for the relevant year with the amount of PSW earnings noted. Your province or territory’s wage agreement status must be clear—make sure to check with local government announcements.
Examples of Savings
- If you’re earning $22,000 in PSW-qualifying wages in a region without a bilateral agreement, the credit equals 5% × 22,000 = $1,100, which is the maximum. It fully applies if your eligible income is $22,000 or more.
- With earnings of $10,000, you’d receive $500 back, even if your base federal tax liability was zero—since credit is refundable.
Key Considerations & Planning Tips
- Know your province’s status. Provinces such as British Columbia have bilateral agreements already in place—residents there may not qualify under the new federal credit. If you’re close to a provincial border or moving, this matters.
- Recordkeeping matters. Keep accurate T4s or pay slips that clearly identify PSW earnings—don’t mix PSW work with undefined caregiving or volunteer roles.
- Timing big expenses. If PSW earnings fluctuate, aim to have higher eligible earnings in years where you can fully use the credit cap.
Impact Beyond Individuals
- For provinces without existing agreements, this credit eases recruiting by making PSW roles more financially attractive.
- Employers might see retainment improve—workers gain more take-home pay.
- For government budgets, projected cost to the federal treasury is balanced by savings in social services where PSW turnover declines. (canada.ca)
What To Check Next Year
- Province-by-province bulletins to verify whether your area is ‘covered’ or ‘non-covered’. The federal government has stated the credit won’t apply in provinces with wage agreements. (canada.ca)
- Be alert for regulatory guidance from the Canada Revenue Agency (CRA)—once the 2026 tax year begins, rules will be crystal-clear.
Bottom Line
This credit delivers real, refundable relief for personal support workers in many parts of Canada starting 2026. If you're a PSW, plan early, track earnings carefully, and understand how your province aligns—or doesn’t—with federal agreements. Up to $1,100/year in credit is possible and meant to meaningfully close the wage-gap.