Why do I get a tax refund in Canada?
A refund happens when the tax withheld from your paycheques and other income during the year is more than your actual tax liability. Deductions like RRSP contributions and non-refundable credits reduce your tax, so if withholding did not account for them, you receive the difference back.
Does an RRSP contribution increase my refund?
Yes. An RRSP contribution is deducted from taxable income, reducing tax at your marginal rate. If your employer withheld tax as if you had not contributed, the deduction typically generates a refund equal to roughly your marginal rate times the contribution.
When will I get my refund from the CRA?
The CRA typically issues refunds within about two weeks for returns filed electronically with direct deposit, and up to eight weeks for paper returns. Refunds may be delayed if your return is selected for review or if you owe other government debts.
What is the difference between a deduction and a credit?
A deduction (like RRSP or child care expenses) reduces your taxable income, saving tax at your marginal rate. A non-refundable credit (like the basic personal amount) reduces tax directly, usually at the lowest tax rate. Both lower your final tax, but they work differently.