So I was browsing the government of canada website when I ran accross the annual budget and saw some items related to new 'tax credits'. Not knowing what this really meant, I thought I'd do some research. (My dear mother has done my taxes for all years I've been eligible so far, but it's time to start understanding it myself).
Disclaimer: This is my current understanding only! I can't commit to this being correct. Please comment if you have corrections or clarifications.
One pays tax (surprise!), to various places but in this case I'm just going to look at federal canada.
The current tax rates should be here. Basically, If you earn $0 to ~$41,000 you pay 15% of that as federal tax. ~$41,000 to ~$83,000 you pay 15% on the first $41,000 and 22% on the rest. And so on.
There are tax credits and tax deductions.
Tax deductions reduce the actual taxable amount by the stated amount. So a tax deduction of $5000 reduces a taxable income of $35,000 to $30,000. Common tax deductions include a Basic Personal Amount of ~$10,000, and CPP contributions.
A tax credit is an amount and a percent. Say $1000 at 15%. Take the percentage of the amount, 1000 * .15 = $150 in this case, and subtract that from the tax you actually pay. Examples include transit passes. You have to actually pay the amount to get it, so that $1000 is actually a maximum and you get 15% of whatever you actually pay.