Refundable and Non-Refundable Tax Credits
What is Refundable Tax Credits?
This is a tax benefit. When you're calculating how much tax you owe the government at tax time, this type of credit reduces the amount.
If the tax you owe is less than this credit, not only do you not have to pay any tax, but the government will also give you back the difference.
Example: Let's say you owe $1000 in taxes, but you have a $1200 refundable tax credit. First, that $1200 will offset your $1000 tax bill. Then, you'll get a refund of the extra $200 from the government.
What is Non-Refundable Tax Credits?
This is also a tax benefit. It can reduce the amount of tax you owe.
However, unlike refundable credits, if the tax you owe is less than this credit, you won't get the excess back. In other words, it can only reduce your tax bill to zero but won't give you an extra refund.
Example: Let's say you owe $1000 in taxes, but you have a $1200 non-refundable tax credit. This $1200 will offset your $1000 tax bill, so you don’t owe any taxes. But, you won't get a refund of the extra $200.
Some common tax credits:
Below are some of the refundable and non-refundable tax credits as per Canadian tax regulations. Please note that tax laws and policies may change over time, and there might be other credits as well. It's best to consult with a tax expert or refer to the Canada Revenue Agency (CRA) official website for up-to-date information.
Non-refundable tax credits:
Basic Personal Amount: This is a basic exemption that every taxpayer can claim(Line 30000).For 2022, the basic personal amount is $14,398 if net income on Line 23600 is $155,625 or less. The basic personal amount is $12,719 if net income is $221,708 or more.
Age amount: which can be claimed if a taxpayer is age 65 or over on December 31, 2022 (Line 30100)
Spousal or Common-Law Partner Amount: This can be claimed if you support a spouse or common-law partner with a low income(Line 30300).
Amount for an eligible dependant: which can be claimed by certain taxpayers who support a dependant other than a spouse or common-law partner (Line 30400)
Canada caregiver amount for spouse or common-law partner, or eligible dependant age 18 or older:which can be claimed by taxpayers who maintain a dwelling for, and live with, an infirm or disabled individual who is 18 or over (Line 30425)
Home buyers' amount: a non-refundable tax credit designed to assist first-time homebuyers with the costs associated with purchasing a home.
Student Loan Interest: You can claim a credit for certain types of student loan interest that you've paid(Line 31900)
Charitable Donations: Donations made to eligible charities can be claimed as a tax credit(Line 34900)
Refundable tax credits:
Working Income Tax Benefit (WITB): This is a tax credit for those in the low-income working population.
Goods and Services Tax/Harmonized Sales Tax (GST/HST) Credit: This is designed for low- and moderate-income families to offset a portion of the GST or HST that they pay.
Provincial or Territorial tax credits: Some provinces or territories may have their own refundable tax credits.
The above are just some common tax credits. Specific amounts, eligibility, and other details may vary based on the year, government policies, or other factors. If you need more detailed information or have specific questions, it's advisable to consult with a tax expert or review official CRA documentation.
Home Accessibility Tax Credit?
What is the Home Accessibility Tax Credit?
The Home Accessibility Tax Credit is a non-refundable tax credit aimed at helping individuals make their homes more accessible for seniors or disabled persons. It provides up to a 15% tax credit on eligible expenses, with a maximum tax saving of $3,000. Renovations must enable easier access or reduce potential harm within the dwelling. However, routine maintenance, household appliances, financing expenses, and those for the purpose of income generation or value enhancement are ineligible.
The credit encourages a more inclusive living environment, promoting independence and safety for seniors and disabled individuals within their homes.
Renovations for Accessibility: Expenses that enable a qualifying individual to gain access to, or to be mobile or functional within the residence.
Safety Improvements: Expenses that reduce the risk of harm to a qualifying individual within the residence or in gaining access to it.
Enduring Nature: Expenses that are of an enduring nature and are integral to the residence or surrounding land.
Independent Properties: Amounts paid for properties that can be used independently of the renovation.
Routine Maintenance: Annual, recurring, or routine repair or maintenance costs.
Household Appliances: Costs for household appliances or electronic home-entertainment devices.
Services: Expenditure on housekeeping, security monitoring, gardening, outdoor maintenance, or similar services.
Financing Costs: Costs associated with financing the renovation.
Value Increase Purposes: Costs incurred primarily for the purpose of increasing or maintaining the value of the residence.
Business Purposes: Costs made or incurred for the purpose of gaining or producing income from a business or property.
Non-Arm's Length Persons: Goods or services provided by a non-arm’s length person unless the person is a GST registrant.
Reimbursed Expenses: Expenses that have been reimbursed, other than as government assistance.
Make sure any expenses you are claiming meet the criteria listed above to ensure they are eligible for the Home Accessibility Tax Credit.
Disability Tax Credit
The Disability Tax Credit (DTC) is a non-refundable tax credit in Canada, offered by the Canada Revenue Agency (CRA), designed to provide financial support to individuals with severe and prolonged impairments that significantly affect their daily life activities. This credit helps to reduce the amount of income tax these individuals or their supporting family members may have to pay.The process of applying for the Disability Tax Credit (DTC) in Canada includes the following steps:
Have a severe and prolonged impairment.
The impairment must significantly restrict one or more basic activities of daily living, such as walking, feeding, or dressing.
Consult a qualified medical practitioner who can certify the extent and effects of the disability.
Completion of Form T2201(DownLoad here):
Fill out Form T2201, Disability Tax Credit Certificate, with details about the impairment and its impact on daily activities.
Submission to the CRA:
Submit the completed Form T2201 to the Canada Revenue Agency (CRA) for assessment.
The CRA reviews the application and determines if the applicant meets the eligibility criteria for the Disability Tax Credit.
Approval and Credit Claim:
If approved, the individual or their supporting family member can claim the non-refundable tax credit on their income tax return.
It's important to note that eligibility for the Disability Tax Credit involves specific and stringent criteria, and each case is subject to individual assessment by the Canada Revenue Agency.
Disability Tax Credit Transferred from a Dependant.
The Disability Tax Credit transferred from a dependant is a provision in the Canadian tax system that allows a person with a disability, who is unable to fully utilize the credit, to transfer a portion of their Disability Tax Credit to a supporting family member. This transfer can result in a reduction of the supporting family member's tax payable, providing financial support to the caregiver or supporter of the individual with the disability.
The transfer is subject to certain rules and limitations set by the Canada Revenue Agency (CRA) to ensure that the credit is appropriately allocated and that both the individual with the disability and the supporting family member meet the eligibility criteria.
The Canada Caregiver Amount
The Canada Caregiver Amount is a tax credit that can be claimed by an individual for providing care to certain family members with specific care needs. This credit can be claimed for the following individuals:
Spouse or Common-law Partner with Impairment: The credit can be claimed if the spouse or common-law partner has a physical or mental impairment that requires assistance and care.
Infirm Dependant Age 18 or Older: The credit applies to an infirm dependant who is 18 years of age or older and requires assistance and care due to physical or mental limitations.
Infirm Dependant Under 18 Years of Age: The credit can also be claimed for an infirm dependant who is under 18 years of age and needs significant care and assistance due to physical or mental impairments.
In each case, the individual claiming the Canada Caregiver Amount must meet the specific eligibility criteria outlined by the Canada Revenue Agency (CRA) and provide the necessary care and support to the eligible family member.
Q:Why is there a distinction in the Canada Caregiver Amount for individuals who are 18 years old or older and those who are under 18?
A:The distinction serves to acknowledge the diverse caregiving needs at different life stages. Individuals over 18 often require ongoing support for enduring health issues, while those under 18 typically need specialized care corresponding to their developmental stage. Additionally, this differentiation reflects the varying tax credit amounts that can be claimed, catering to the specific caregiving expenses associated with each age group.