Canada Tax credits are meant to help cancel out your income taxes. You can claim these credits when you file your personal tax return. Tax credits are applied against your income tax balance. They’re refundable if they don’t exceed your tax payable amount. This includes both federal and provincial non-refundable tax credits.
What Are Personal Tax Credits in Canada?
The tax credits you receive help reduce the amount of taxes you owe. They’re based on amounts that are ‘taken off’ your pay cheque (for example, Canada Pension Plan and Employment Insurance contributions) that are then multiplied by the appropriate percentage – usually 15% – to give you the credit amount.
You may qualify for multiple tax credits and benefits depending on your circumstances. These can include refundable and non-refundable tax credits, deductions, and rebates.
The Canadian government offers a variety of tax credits and benefits to make it easier for people to live in Canada. These can include the federal CCB payment for children, provincial tax credits, and benefits like the Quebec refundable cost of living tax credit. However, keeping track of all the tax credits and benefits you may be eligible for can be difficult. That’s why national charity Prosper Canada created the Benefits wayfinder tool, which is integrated into TurboTax, to ensure you maximize every benefit and credit you’re entitled to.
Capital Loss Tax Credit
Whether you’re a homeowner, an employee, or self-employed, there are tax credits available to help you offset the cost of various expenses. For example, if you buy your first home in Canada, you can claim the Home Buyers’ Amount to reduce the federal tax you owe. Some provinces also offer their own first-time homebuyer tax credits, so check with your Provincial government for more details.
Another type of credit is the capital loss tax credit, which allows you to deduct any losses on investments you made that year. However, it’s important to note that you can only use the capital loss tax credit against income from the same investment or investments in the same year.
Many personal tax credits and deductions are available at the federal and provincial levels. For example, parents may be eligible for federal tax credits such as the Canada child benefit or disability tax credit, while a number of provincial tax credits, including the Ontario Trillium Benefit and the Canada workers’ benefit, may be available to lower-income families.
Individual Income Tax Credit
The individual income tax credit is a non-refundable tax credit that can reduce the amount of taxes a person has to pay. Individuals can use it to offset federal income taxes and, in some cases, provincial/territorial taxes. It also offsets the gross-up portion of eligible dividends received from Canadian corporations.
The personal tax deductions that are used to calculate a taxpayer’s taxable income include the basic personal amount, dependents, Canada/Quebec Pension Plan contributions, employment insurance premiums, disabilities, and tuition and education expenses. These are deducted from a person’s total tax payable before credits are applied.
Eligible individuals can claim a variety of additional tax deductions and credits, such as the home buyers amount (HBA), charitable donations, medical expense, and moving expenses. However, they must file their taxes on time to qualify for the credit. Some tax credits are automatically applied based on household income, and others have to be manually applied. The goods and services tax/harmonized sales tax credit is paid out quarterly and automatically applied to households with low-to-moderate incomes to offset the GST/HST they’re paying on products and services.
Other Canada Tax Credits
If you meet the criteria for a particular credit, the amount of income tax you pay will be reduced or eliminated. This can significantly affect your income tax bill, particularly on the non-refundable credits (personal amounts, basic personal amount, and Canada child benefit).
If your taxable income is below a threshold, you may qualify for a number of different tax deductions, including those for mortgage interest, medical expenses, charitable donations, and home office expenses. You may also be able to claim the Ontario Trillium Benefit, Canada Worker Benefit, and tuition credits.
Provincial and territorial tax credits are often very specific and based on your residency or income status, so it’s important to understand if you are eligible for these. The more credits you qualify for, the lower your income taxes will be. You can find these credits through CRA’s tax credit directory or by searching online. The Government of Canada’s website is another good resource.