New $1,100 Tax Credit For PSWs In Canada Coming Soon

Last Updated On 15 November 2025, 9:54 AM EST (Toronto Time)

Canada is preparing to introduce major new financial support for personal support workers through a proposed refundable tax credit worth up to $1,100 per year.

This new measure, known as the Personal Support Workers Tax Credit, was announced as part of Budget 2025.

Because it is only a proposed measure, it will come into effect only if the federal Budget 2025 is passed in the House of Commons.

If approved, the credit will apply from 2026 to 2030 and provide significant support for frontline care workers across most provinces and territories.

Personal support workers remain the backbone of Canada’s elder care, disability support, long-term care, and home-care systems.

This comprehensive article explains every detail of the proposed Personal Support Workers Tax Credit, including eligibility rules, income requirements, excluded provinces, employer responsibilities, filing conditions, and expected workforce impacts.

Overview Of The Proposed Personal Support Workers Tax Credit

The proposed Personal Support Workers Tax Credit would provide a refundable federal tax credit equal to 5% of eligible earnings, up to a maximum of $1,100 per year.

This means PSWs who earn at least $22,000 per year in qualifying income would receive the full credit annually.

Since the credit is refundable, workers would receive the money even if they owe no income tax.

Refundable credits directly increase the taxpayer’s refund and are especially beneficial for lower-income and part-time workers.

The tax credit is not permanent. Under the Budget 2025 proposal, it applies only to the 2026, 2027, 2028, 2029, and 2030 taxation years.

The federal budget for 2025 must be approved with this measure through the regular budget approval process before it becomes law.

Who Would Qualify As An Eligible Personal Support Worker?

To ensure the credit reaches genuine frontline caregivers, the proposal outlines several detailed eligibility criteria.

A worker must meet all conditions to be considered an eligible personal support worker.

Core Eligibility Requirements

An eligible PSW must typically provide one-on-one care and essential support that focuses on optimizing or maintaining an individual’s health and well-being.

These services must be delivered in accordance with the care needs determined or directed by:

a regulated health care professional
a provincially authorized community health organization

The worker must be performing hands-on care rather than administrative, clerical, hospitality, or cleaning-only services.

Required Primary Duties

The worker’s main employment duties must include assisting clients or patients with activities of daily living, such as:

bathing and grooming
dressing
feeding and meal support
toileting and continence assistance
mobility and transfer support
repositioning and safety monitoring
personal hygiene care
social engagement and basic comfort measures

If these tasks represent the worker’s core duties and are performed under appropriate direction, the worker will likely meet the definition of an eligible PSW under the proposed credit.

What Counts As An Eligible Health Care Establishment?

The proposed credit applies only to workers employed by eligible health care establishments.

Budget 2025 specifies the following types of establishments:

hospitals
nursing care facilities
residential care facilities
community care facilities for seniors
regulated home-health-care establishments
similar provincially regulated health facilities

The establishment must be formally regulated. Informal or unregulated private employment may not qualify unless the work is performed through a licensed home-care agency or provincially approved organization.

What Qualifies As Eligible Earnings?

Eligible earnings are defined as all taxable employment income earned by an eligible PSW while performing duties for an eligible health care establishment.

This includes:

wages
salaries
hourly income
overtime pay
shift premiums
taxable benefits related to PSW employment
similar tax-exempt income earned on a reserve

Eligible earnings do not include:

income from non-PSW jobs
income earned in unregulated facilities
private cash-based care without proper employment structure
self-employment income unrelated to regulated PSW duties

For PSWs with multiple employers, each employer must certify the eligible earnings they paid to the worker.

Provinces And Territories Excluded From The Tax Credit

The proposed Personal Support Workers Tax Credit would not apply in three jurisdictions:

British Columbia
Newfoundland and Labrador
Northwest Territories

These regions have separate bilateral agreements with the federal government.

They receive dedicated wage-increase funding for personal support workers under the Personal Support Workers and Related Professions Addendum to their Aging with Dignity agreements.

Because PSWs in these provinces and territories already receive targeted wage increases, they are excluded from the refundable federal credit to avoid duplication of benefits.

If Budget 2025 passes, PSWs in these regions will still receive compensation support, but it will not come from the new credit.

Why The Government Introduced This Proposed Credit

Canada continues to face a severe shortage of personal support workers across hospitals, long-term care homes, retirement residences, and home-care programs.

Vacancy rates remain high and continue to grow as Canada’s population ages rapidly.

The proposed credit aims to:

improve retention among current PSWs
attract new workers to the field
increase financial stability for low-income care workers
provide recognition for essential care contributions
reduce pressure on overstretched health systems
improve continuity of care across long-term care and home-care sectors

PSWs often face physically demanding and emotionally intense working conditions.

The federal government introduced this proposal to offer meaningful financial relief without increasing employer payroll costs.

How Much PSWs Would Receive Based On Income

The tax credit equals 5% of eligible earnings, up to a maximum of $1,100.

To receive the full amount, workers would need at least $22,000 of eligible income per year.

Here is a general income-to-benefit breakdown:

$10,000 in eligible earnings → $500 credit
$15,000 in eligible earnings → $750 credit
$20,000 in eligible earnings → $1,000 credit
$22,000 or more → full $1,100

Because most full-time PSWs earn well above $22,000 per year, most full-time workers would qualify for the maximum annual credit if the proposal passes.

Part-time workers, students, and casual home-care providers would receive a proportional amount based on their income level.

Employer Certification Requirement

To prevent incorrect or fraudulent claims, the proposed credit requires employers to certify the eligible earnings of each PSW.

Employers must confirm that:

the worker was employed as a PSW
the duties performed meet eligibility rules
the establishment is eligible under the definition
the total eligible earnings for the year are accurate

The federal government will publish a prescribed form and official guidelines once the budget is approved.

PSWs with multiple employers must obtain certification from each employer to ensure all qualifying income is counted.

Filing A Tax Return Would Be Mandatory

Because this is a refundable tax credit, it can only be issued through the tax system.

Therefore, PSWs must file a tax return to receive the credit, even if they have no tax owing.

Workers who do not file a tax return will not receive the credit.

Special Rules For Death And Bankruptcy

Budget 2025 includes special provisions to ensure that no eligible worker is unfairly excluded due to major life events.

If the worker dies during the year

The tax return filed by the worker’s legal representative would be treated as having been filed by the worker. This ensures the credit is still issued for that year.

If the worker becomes bankrupt

Eligible earnings from both before and after the bankruptcy event would count toward calculating the credit for that tax year.

When Would The New Tax Credit For PSWs Take Effect?

If Budget 2025 passes in the House of Commons, the credit would apply to earnings from:

2026
2027
2028
2029
2030

Workers would claim it when filing their tax returns each spring, beginning with the 2026 tax year, which is filed in 2027.

Earnings from 2025 and earlier years would not qualify.

Impact On Workforce Retention And Care Quality

The proposed credit is expected to improve workforce stability and reduce turnover, a major challenge in long-term care, home care, and elder-care programs across Canada.

Improved retention would benefit the health-care system by:

reducing hospital discharge delays
improving long-term care staffing consistency
stabilizing home-care waitlists
decreasing burnout among existing PSWs
improving continuity of patient care
reducing pressure on nurses and other licensed staff

A multi-year financial incentive can help keep experienced workers in the sector while also attracting new recruits.

The proposed Personal Support Workers Tax Credit represents a significant federal effort to recognize and support frontline caregivers across Canada.

Worth up to $1,100 per year from 2026 to 2030, the credit is designed to improve retention, stabilize staffing levels, and support the essential work of PSWs in regulated health-care environments.

Because it is part of Budget 2025, this measure is not yet law and remains subject to approval in the House of Commons.

If passed, it will provide meaningful financial support for most PSWs across Canada, except in regions where alternative wage-increase agreements already exist.

This proposed credit acknowledges the demanding nature of PSW work and reinforces the importance of strong and stable frontline care for seniors, people with disabilities, and Canadians in need of daily living assistance.

Frequently Asked Questions (FAQs)

Who qualifies for the new PSW tax credit of up to $1,100?

The credit is proposed for workers who provide direct one-on-one essential care that supports a person’s health, safety, well-being, autonomy, or comfort. Their primary duties must involve daily living support such as bathing, dressing, feeding, mobility assistance, and personal hygiene. They must work for a regulated health care establishment such as a hospital, long-term care facility, or licensed home-care agency.

How much money can a PSW receive from the credit?

Eligible PSWs can receive up to $1,100 per year. The credit equals 5% of eligible earnings, so workers earning $22,000 or more in qualifying income would receive the full amount each year from 2026 to 2030.

Which Canadian provinces are excluded from the new credit for PSWs?

The proposed credit for PSWs would not apply in British Columbia, Newfoundland and Labrador, and the Northwest Territories. These regions already receive federal funding through separate agreements that increase wages for personal support workers.

Will the new PSW tax credit be automatic?

No. PSWs would need employer certification of eligible earnings and must file a tax return to receive the credit. The Canada Revenue Agency would then calculate and issue the refundable amount.

When will PSWs start receiving this benefit?

If Budget 2025 passes in the House of Commons, the credit would begin for the 2026 tax year. Eligible workers would first receive the credit when filing their 2026 taxes in spring 2027.

Gagandeep Kaur Sekhon

Gagandeep Kaur Sekhon moved to Canada in 2010 on a study visa. She navigated through the ups and downs of her student life and gained her permanent residency in 2015. Today, she is a proud Canadian citizen residing in Calgary, Alberta. She is mother of 2 beautiful daughters and making her difference through writing and guidance at INC – Immigration News Canada.