Compliance
What the New Personal Support Workers Tax Credit Means for Canadian Employees
Budget 2025 introduces a new refundable tax credit for personal support workers—here’s who qualifies, how much can be saved, and what to watch out for.
By NomadicTax Research Team • 5-8 min read • November 22, 2025
## 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](https://www.canada.ca/en/department-finance/news/2025/10/budget-2025-to-invest-in-canadian-workers.html?utm_source=openai))
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](https://www.canada.ca/en/department-finance/news/2025/10/budget-2025-to-invest-in-canadian-workers.html?utm_source=openai))
## 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](https://www.canada.ca/en/department-finance/news/2025/10/budget-2025-to-invest-in-canadian-workers.html?utm_source=openai))
## 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](https://www.canada.ca/en/department-finance/news/2025/10/budget-2025-to-invest-in-canadian-workers.html?utm_source=openai))
- 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.