Canadian Tax Credits 101 — What They Are and How to Claim Them

Refundable Tax Credits

Refundable tax credits result in a tax refund if the credit amount exceeds what you owe in taxes. To put it simply, you get extra cash from the government. For example, let's say you owe $500 in taxes, but you have a $700 refundable tax credit from the Goods and Services Tax/Harmonized Sales Tax (GST/HST). You'd not only wipe out that $500 tax bill but also get a $200 refund from the government.

Non-Refundable Tax Credits

Non-refundable tax credits can potentially bring your tax bill down to 0, but won't result in a refund. Say you owe $1,000 in taxes, and you have a $1,200 non-refundable credit for tuition fees. That credit would eliminate your $1,000 tax bill, making it zero. But the extra $200? You don't get that back in cash; it just disappears.

Basic Personal Amount (BPA)

Every Canadian taxpayer is entitled to claim a Basic Personal Amount. This is a non-refundable tax credit that reduces your federal tax liability. The BPA has been scheduled to rise incrementally since 2019, and has reached $15,000 for the 2023 tax year.

This increase will be indexed for inflation in subsequent years. Individuals with net incomes too high to benefit from the increased BPA will continue to claim the existing amount, which will also be indexed for inflation annually.

Spousal and Common-Law Partner Amount

You may be eligible for the Spousal and Common-Law Partner Amount non-refundable tax credit if you're supporting a spouse or common-law partner with a lower income. The amount you can claim depends on your partner's net income.

Amount for an Eligible Dependant

The Amount for Eligible Dependent, also known as the "equivalent-to-spouse" amount, is a non-refundable credit for single, separated, or divorced individuals who are supporting a dependent.

Disability Tax Credit

The Disability Tax Credit is a non-refundable credit designed to help individuals with severe and prolonged physical or mental impairments by reducing the federal tax they owe.

Age Amount

Canadian taxpayers over 65 years of age on December 31, 2022 could claim the Age Amount non-refundable tax credit if their net income is less than $92,480.

Goods and Services Tax/Harmonized Sales Tax GST/HST Credit

This is a quarterly, tax-free payment that helps individuals and families with low or modest incomes offset all or part of the GST or HST they pay.

Ontario Trillium Benefit

If you're a resident of Ontario, the Ontario Trillium Benefit includes the Ontario Sales Tax Credit, the Ontario Energy and Property Tax Credit, and the Northern Ontario Energy Credit.

Charitable Tax Credit

Donating to registered charities not only helps a good cause but also earns you a non-refundable tax credit. The more you give, the bigger your credit.

Self-Employment Expenses

If you're self-employed, you can deduct qualified business expenses from your income, effectively lowering your tax bill. This includes costs like office supplies, travel, and even a portion of your home expenses if you have a home office.

Work from Home Expenses

The pandemic has made working from home more common, and the CRA has introduced a simplified method to claim home office expenses. You can claim $2 for each day you worked from home due to the pandemic during 2020, 2021, and 2022, up to a maximum of $400 for the year.

Canada Workers Benefit (CWB)

This refundable tax credit is designed to support low-income workers and encourage more people to join the workforce. It can provide a significant boost to your annual income.

Registered Retirement Savings Plan (RRSP) Deduction

Contributing to an RRSP not only helps you save for retirement but also offers immediate tax benefits. The contributions are deductible, which can lower your taxable income for the year.

Home Buyers' Amount

First-time homebuyers can claim a $10,000 non-refundable tax credit for the purchase of a qualifying home in 2022 ($5,000 if the home was purchased before 2022).

Moving Expenses

If you moved for work or school and your new home is at least 40 kilometers closer to your new work or school location, you can deduct eligible moving expenses.

Climate Action Incentive

Residents of certain provinces can claim this refundable tax credit, which is intended to offset the cost of the federal carbon tax.

Provincial Basic Personal Amount

Just like the federal basic personal amount, each province and territory has its own basic personal amount that residents can claim to reduce their provincial tax liability.

Provincial Tuition and Education Credits

Some provinces still offer tuition and education credits, even though the federal education and textbook amounts have been phased out.

Provincial Home Renovation Credits

Certain provinces offer tax credits for home renovations that improve energy efficiency, accessibility, or both.

Provincial Cultural and Recreational Credits

Check if your province offers credits for children's participation in cultural, recreational, or sports activities.

Provincial Seniors' Credits

Many provinces offer additional tax credits for seniors, such as property tax credits or credits for home accessibility modifications.

Filing Your Tax Return

The first step is, of course, to file your tax return. You can claim most credits and benefits by filling out specific lines on your tax return form. You can do this manually, use tax software, or hire a professional.

Required Documents

Make sure you have all the necessary documents to support your claims. This could include receipts, T4 slips, or medical records. Keep these documents for at least 6 years in case the CRA wants to review your return.

Deadlines

Be mindful of tax deadlines to avoid late filing penalties. The deadline for most Canadians is April 30, but if you or your spouse are self-employed, you have until June 15.

Amendments

If you realize you've missed claiming a credit or benefit, you can amend your tax return. You can do this online through the CRA's "Change My Return" service or by mail.

Direct Deposit

For quicker refunds, especially for refundable credits, consider setting up direct deposit with the CRA.