Moving to Canada is an exciting milestone, but it also comes with new systems to navigate—especially when it comes to taxes. Many newcomers are surprised to learn that they may qualify for several federal and provincial tax credits during their very first year of residency. Understanding these benefits can make a meaningful difference in your financial stability as you settle into life in Canada.
This guide explains the essential tax credits, benefits, and filing rules for new Canadians. It is designed to be practical, welcoming, and easy to understand, while ensuring accuracy for first-year residents. Whether you arrived on a work permit, permanent residency, or as a student transitioning to residency status, knowing your tax options early will help you maximize your refund and avoid missing out on valuable government programs.
Understanding Your Residency Status for Tax Purposes
Before exploring tax credits, it is important to understand how Canada determines tax residency. Your immigration status (PR, study permit, work permit) does not automatically determine your tax status. Instead, the Canada Revenue Agency (CRA) looks at your residential ties.
You are generally considered a tax resident of Canada once you establish significant residential ties, such as:
- A home in Canada
- A spouse or dependent living with you in Canada
- Personal property in Canada
- A Canadian driver’s licence or health card
Once you are considered a resident for tax purposes, you must report your worldwide income from that point forward. You will also become eligible for a variety of federal and provincial tax credits, even if you lived in Canada for only part of the year.
Why Filing a Tax Return Matters for New Canadians
Even if you earned little or no income in your first year, filing a tax return is essential because it allows the government to determine your eligibility for ongoing credits and benefits. These payments are not issued automatically—you must file taxes to activate them.
Some of the most important reasons to file a first-year Canadian tax return include:
- Receiving GST/HST credits
- Qualifying for the Canada Child Benefit
- Unlocking provincial and territorial benefits
- Carrying forward tuition credits
- Establishing contribution room for the RRSP
- Having accurate records for future immigration or sponsorship applications
Many newcomers mistakenly delay filing, thinking they must wait until they hold a permanent residency card. In reality, your tax obligations—and benefits—begin as soon as you become a resident for tax purposes.
Key Federal Credits and Benefits for New Canadians
GST/HST Credit
One of the most significant credits available to newcomers is the GST/HST credit, which is designed to help offset the cost of sales taxes for lower- and middle-income households.
To receive the GST/HST credit in your first year:
- File a tax return for your arrival year, even if you had no income.
- Complete form RC151 (GST/HST Credit Application for Individuals Who Become Residents of Canada).
- Ensure your marital status and dependent information are accurate.
Payments are made quarterly, and the amount depends on your family income and the number of children you have. Many new Canadians receive this credit starting within a few months of filing.
Canada Child Benefit (CCB)
If you have children under 18 and meet residency requirements, you may qualify for the Canada Child Benefit—a tax-free monthly payment to help with the cost of raising children.
To qualify as a newcomer, the CRA requires:
- Your family to be tax residents of Canada
- Both parents to file a tax return each year
- Completion of Form RC66 (Canada Child Benefits Application) and Schedule RC66SCH (Status in Canada/Income Information for the Canada Child Benefits Application)
Newcomers should apply as soon as they receive their Social Insurance Number (SIN). The CRA may also ask for immigration documentation before issuing the benefit.
Canada Workers Benefit (CWB)
If you earned income from employment or self-employment in your first year, you may be eligible for the Canada Workers Benefit. This refundable credit supports individuals and families in the workforce with low income.
Eligibility depends on:
- Employment income levels
- Residency status
- Family situation
New Canadians often qualify because income is typically lower in the initial settlement years. The benefit is claimed directly on the tax return.
Disability Tax Credit (DTC)
If you or a dependent has a severe, prolonged disability, you may qualify for the Disability Tax Credit. Newcomers can apply using Form T2201, which must be certified by a medical professional.
You do not need years of Canadian medical records to apply—your condition simply needs to meet CRA’s eligibility criteria.
Important Deductions for New Canadians
In addition to credits, there are deductions that can reduce your taxable income and increase your refund.
Moving Expenses (If You Moved for Work or Study)
If you relocated to Canada to study full-time or start employment, some moving expenses may be deductible. Eligible expenses can include:
- Transportation costs
- Temporary living costs
- Fees for cancelling a lease
- Storage fees
These can only be claimed if the move brought you at least 40 km closer to your new place of work or school and you earned income as a result.
Tuition Tax Credits
Many international students transition to resident status during or after their studies. Once you become a tax resident, the unused portion of your tuition costs becomes a valuable credit.
You can:
- Claim the credit for the year of residency
- Carry it forward indefinitely
- Transfer a portion to a spouse, parent, or grandparent
This credit reduces taxes owed once you start working full-time.
RRSP Contribution Room Begins on Arrival
RRSP contribution room is calculated based on earned income after you become a tax resident. This is especially important for newcomers planning long-term savings because:
- You cannot contribute to an RRSP before becoming a Canadian tax resident
- Contribution room accumulates each year you file taxes with earned income
- RRSP contributions reduce taxable income and can help increase refunds
Provincial and Territorial Credits for New Canadians
Every province and territory has its own set of benefits that newcomers may qualify for after filing a tax return. Depending on where you live, you may be eligible for programs such as:
- Ontario Trillium Benefit
- BC Climate Action Tax Credit
- Alberta Child and Family Benefit
- Quebec Solidarity Tax Credit
- Manitoba Education Property Tax Credit
These benefits are often issued monthly or quarterly, and eligibility is tied to your income and family situation.
A common mistake newcomers make is assuming that these benefits start automatically. They do not—you must file your return to activate them.
Tax Filing Tips for New Canadians
Report Your World Income From the Date You Became a Resident
On your first Canadian tax return, you must indicate:
- Your arrival date
- The income you earned after becoming a tax resident
- Your worldwide income for the part of the year before your arrival (for benefit calculation purposes)
This ensures accurate assessment of benefits such as GST/HST and the Canada Child Benefit.
Keep All Immigration Documents Organized
When you file for the first time, CRA may request copies of:
- Your passport
- Immigration landing paper or confirmation of permanent residence
- Work or study permits
- Proof of residency ties
Having these documents available can speed up the processing of your return and benefits.
Apply for a Social Insurance Number Immediately
You cannot file taxes, work legally, or apply for most benefits without a SIN. Apply at Service Canada as soon as you arrive and keep the confirmation letter in a secure place.
Open a Canadian Bank Account Early
Many benefits, including GST/HST and the CCB, are paid through direct deposit. Opening a bank account helps you receive payments faster and avoid delays.
Consider Using a Tax Professional in Your First Year
Canadian tax rules can be complex, especially for newcomers who:
- Arrived partway through the year
- Had income from multiple countries
- Are applying for child or family benefits
- Own property abroad
- Are filing taxes jointly as a couple for the first time
A Canadian tax professional can help ensure that your first-year return is accurate and that you receive every credit you are eligible for.
Common Mistakes New Canadians Should Avoid
Here are some frequent errors that can lead to delays or missed benefits:
- Not filing a return because you had no income
- Forgetting to apply for GST/HST credit using the RC151 form
- Not reporting worldwide income before arrival
- Using foreign tax rules to estimate Canadian tax liability
- Missing application forms for the Canada Child Benefit
- Not updating marital status with CRA
- Waiting too long to update your address
Avoiding these mistakes can make your transition to Canada smoother and financially more secure.
Making the Most of Your First Tax Year
Your first tax year in Canada sets the foundation for your financial future. Filing your return accurately and on time allows you to access benefits that can meaningfully support your household—especially during your first year of settlement. By understanding residency rules, claiming the credits available to you, and taking advantage of deductions such as moving and tuition expenses, you can maximize your refund and begin building a strong financial footing in your new home.
Need Help Navigating Your First Tax Return in Canada?
If you’re a new Canadian looking for support with tax filing, benefit applications, or understanding your eligibility for credits, our team of experienced tax professionals is here to help. We specialize in guiding newcomers through their first year with clarity, accuracy, and personalized advice. Book a consultation today to make sure you’re receiving every benefit available to you and starting your financial journey in Canada on the right foot.
Disclaimer
The information discussed in this article is general in nature and should not be construed as any sort of advice. If you have any particular questions regarding your personal tax situation, please reach out to sandeep@multanitax.ca.
Photo by Juan Rojas on Unsplash
