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)
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).
- 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).
- They must file a tax return for the taxation year, even if no tax is owed. (budget.canada.ca).
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)
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) |
| 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) |
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).
- 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).
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)
Actionable Steps
- Track your earnings as a PSW and confirm your employer/facility type qualifies.
- Request employer certification if needed; keep records of duties that meet eligibility criteria.
- Plan tax filing for 2026 onward, claiming the refundable credit via CRA forms.
- Consult a tax preparer especially if living in or moving between excluded provinces/territories.
- 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.