Tax Planning
What the New Personal Support Workers Tax Credit Means for Caregivers
A temporary 5-year refundable tax credit offers personal support workers up to $1,100/year—this guide explains who qualifies, how to claim it, and how it fits into Budget 2025's broader tax plan.
By NomadicTax Research Team • 5-8 min read • November 21, 2025
## Overview
Budget 2025 introduces a **temporary Personal Support Workers (PSW) Tax Credit** designed to support caregivers and essential health service providers. Available for the 2026 through 2030 taxation years, this credit gives eligible workers a refundable tax credit of **5% of their eligible earnings**, capped at **$1,100 per year**. ([canada.ca](https://www.canada.ca/en/innovation-science-economic-development/news/2025/11/minister-valdez-highlights-budget-2025-investment-in-personal-support-workers-and-skilled-professionals.html?utm_source=openai))
## Who Can Claim the PSW Credit
To be eligible, individuals must meet all the following:
- Be employed as a **personal support worker** for an **eligible health care establishment** (e.g. hospitals, nursing care facilities, residential care, home health agencies) ([budget.canada.ca](https://www.budget.canada.ca/2025/report-rapport/tm-mf-en.html?utm_source=openai)).
- Their routine duties must include **one-on-one care**, essential support for health, safety, daily living or mobilization, as directed by a regulated health professional or a provincial/community health organization. ([budget.canada.ca](https://www.budget.canada.ca/2025/report-rapport/tm-mf-en.html?utm_source=openai)).
- They must file a tax return for the taxation year, even if no tax is owed. ([budget.canada.ca](https://www.budget.canada.ca/2025/report-rapport/tm-mf-en.html?utm_source=openai)).
Certain jurisdictions are **excluded** from eligibility—namely British Columbia, Newfoundland and Labrador, and the Northwest Territories—because those provinces already have bilateral funding agreements boosting PSW wages. ([budget.canada.ca](https://www.budget.canada.ca/2025/report-rapport/tm-mf-en.html?utm_source=openai))
## How It Works in Practice
| Element | Detail |
|---|---|
| Credit rate | 5% of eligible taxable employment income and certain benefits as PSW in qualifying health facilities. ([budget.canada.ca](https://www.budget.canada.ca/2025/report-rapport/tm-mf-en.html?utm_source=openai)) |
| Maximum credit | **$1,100/year** |
| Duration | Tax years 2026–2030 inclusive |
| Filing requirement | Must file a full income tax return; employer must certify eligible earnings in prescribed form. ([budget.canada.ca](https://www.budget.canada.ca/2025/report-rapport/tm-mf-en.html?utm_source=openai)) |
## Broader Budget 2025 Context
This measure is part of several recent changes:
- The **middle-class tax cut** reduces the lowest federal marginal tax rate from 15% to 14% effective July 1, 2025, reducing tax burden for ~22 million Canadians. ([canada.ca](https://www.canada.ca/en/department-finance/news/2025/05/delivering-a-middle-class-tax-cut.html?utm_source=openai)).
- The **Automatic Federal Benefits** initiative aims to provide up to 5.5 million low-income Canadians with prefilled tax returns in 2026, so they’re not excluded from benefits like the GST/HST credit or Canada Child Benefit. ([budget.canada.ca](https://www.budget.canada.ca/2025/report-rapport/chap3-en.html?utm_source=openai)).
## Example Scenarios
- **Maria**, a PSW in Alberta (which **does not** have bilateral support for PSW wages): She earns $22,000/year. The credit: 5% × $22,000 = **$1,100** (she hits the cap). This would reduce her federal tax or be fully refundable if no tax is owed.
- **John**, a PSW in British Columbia (which **does** have bilateral wage support): Not eligible for this credit, since the jurisdiction is excluded. He instead relies on existing wage supports. ([budget.canada.ca](https://www.budget.canada.ca/2025/report-rapport/tm-mf-en.html?utm_source=openai))
## Actionable Steps
1. **Track your earnings** as a PSW and confirm your employer/facility type qualifies.
2. Request employer certification if needed; keep records of duties that meet eligibility criteria.
3. Plan tax filing for 2026 onward, claiming the refundable credit via CRA forms.
4. Consult a tax preparer especially if living in or moving between excluded provinces/territories.
5. Stay alert for CRA guidance and forms once the measure becomes law—changes in regulations and details may occur.
## Why It Matters
- Offers **financial recognition** and relief to PSWs, often working under high stress and low pay.
- Acts as a tool to help with **retention and recruitment** in health care sectors where labour shortages are critical.
- Demonstrates the government’s use of tax policy to address affordability and labour market gaps.
This new tax credit is a significant policy tool—especially if you're a PSW, know one, or are thinking of becoming one. Plan early, document clearly, and you’ll be ready when the claimable period starts in 2026.