Provincial Tax Credits in Canada

Provincial Tax Credits in Canada

There are a number of provincial tax credits available to Canadian taxpayers. These are distinct from federal tax credits, which reduce the amount of taxes you owe. Refundable tax credits will cancel out your payable taxes, whereas non-refundable ones will reduce the amount of your payable taxes to zero but not provide you with a refund.

Newfoundland and Labrador Provincial Tax Credits

Newfoundland and Labrador levies personal income tax directly on taxable income, which is the same as federal taxable income but with different tax brackets and rates. However, there are also provincial deductions and credits that can be claimed. For example, first-time home buyers can claim the Home Buyers Amount. This non-refundable credit can reduce the amount of provincial taxes you owe by up to $1,500. It is indexed annually based on inflation.

If you are a worker who supports your spouse or common-law partner and your net income is less than $13,808, you can claim the Spousal Support Amount. You can claim a maximum credit of $2,295 per family. You can also claim the Family Medical Expenses and Health Benefits Credit.

You may be able to claim the Newfoundland and Labrador volunteer firefighter tax credit. This credit is based on the federal volunteer firefighter tax credit (federal Schedule 1 line 362) and is equal to $3,000 x the lowest NL tax rate for 2016 and later years.

Newfoundland and Labrador offers a number of other non-refundable credits that can reduce the amount of income tax you owe, including the Low Income Tax Reduction and the Home Owner Grant. You can find more details about these and other refundable and non-refundable tax credits on the Government of Newfoundland and Labrador website.

Provincial Tax Credits

Nova Scotia Provincial Tax Credits

Nova Scotians pay provincial income tax in addition to federal taxes. Individuals may be entitled to various provincial non-refundable tax credits in addition to their federal tax deductions and credits. The eligibility conditions and rules for most of these provincial tax credits are similar to those of the corresponding federal credits. The Canada Revenue Agency (CRA) collects and administers individual provincial or territorial tax credits.

Among the province’s most notable credits is the Scientific Research and Experimental Development Tax Credit, which provides incentives to companies that carry out qualifying research and development activities in the province. CCPCs can claim up to 15% of their qualified SR&ED expenditures, which can be carried forward three or more years and applied against federal taxes payable.

The province’s top earners also benefit from a reduced personal tax rate of 21 per cent on taxable income exceeding $150,000, which the province introduced in 2010. Similarly, the province’s table of marginal tax rates has been revised to reflect the removal of the fifth bracket.

The province’s population growth is accelerating, but its low-income residents have been struggling to keep up with the rising cost of living. Food banks are experiencing record demand, and community groups are calling for higher provincial income assistance rates. The 2022 budget includes $36 million to address these needs, including providing support for housing and child benefits.

Ontario Provincial Tax Credits

Ontario Provincial Tax Credits

In Canada, provincial governments can create tax credits and deductions that differ from those offered by federal authorities. Depending on the province and its policies, these can be non-refundable or refundable. They can also impose surtaxes and low-income reductions. However, the provinces have to comply with CRA’s definition of “taxable income.” As such, they aren’t allowed to ignore federal deductions when determining their tax rates or applying tax credits.

Most provinces offer standard tax credits similar to those available at the federal level. These include a basic personal amount, age and disability amounts, caregiving benefits, the home buyers’ rebate, as well as various deductions on pension contributions and CPP/EI premiums.

The Canadian provinces also provide different incentives to businesses that operate within their borders. For example, Ontario’s tax credits include the Ontario Interactive Digital Media Tax Credit, which is a refundable credit based on qualifying Ontario labour expenditures regarding the production of qualified interactive digital media projects.

Moreover, the province offers the Ontario Small Business Deduction designed to promote small businesses’ economic growth. In addition, it offers a suite of cultural media tax credits and programs to encourage innovation and research, and development. On the other hand, Quebec provides a wide range of tax credits ranging from SR&ED-based credits to Technological Innovation credits and E-commerce credits.

Prince Edward Island Provincial Tax Credits

Prince Edward Island Provincial Tax Credits

Prince Edward Island residents are eligible for a number of tax credits. Many of these credits complement similar ones at the federal level, but there are also a few unique provincial credit options for Island residents.

PEI has its own personal income tax rate system like other Canadian provinces. The allowable amount of income before taxes start is called the basic personal amount, and for 2023, this is set at $15,000. Several credits can be claimed to reduce provincial taxes, including the home buyers amount and the children’s wellness tax credit.

The provincial sales tax credit is a refundable credit for residents that pay provincial sales taxes on qualifying purchases. The credit is based on the taxpayer’s net income, but can be reduced by the net income of a spouse or common-law partner, if applicable. The credit can be claimed in addition to the taxable personal income tax credit.

Like most other provinces, PEI also offers a provincial investment tax credit. This is a non-refundable credit against provincial taxes on certain capital investments that are made by incorporated businesses in the province. It can be claimed in addition to the refundable Canada investment tax credit.