When you’re completing your territorial, provincial or federal taxes you may come across the term “non-refundable tax credit.” It is important to understand the difference between a non-refundable tax credit and a refundable tax credit in order to complete your taxes and understand your return amount.
What is a Non-Refundable Tax Credit?
A non-refundable tax credit reduces the amount of tax you pay on your taxable income. You will not get money back from a non-refundable tax credit, but you can use it to offset how much you will pay. If you determine that you owe $1,000 in personal taxes, but you’re also eligible for $500 in non-refundable credits, you’ll only pay $500. However, if you don’t owe any taxes and you are eligible for $500 in non-refundable tax credits, you will not get a $500 refund.
There are only two federal refundable tax credits – the Canada Workers Benefit (formerly the Working Income Tax Credit) and the GST/HST tax credit.
Examples of Canadian Non-Refundable Tax Credits
Here are some details on some of the most widely used non-refundable tax credits.
Basic Personal Amount – In 2020 the federal basic amount is $13,229. You’re also eligible for a provincial basic amount, but these vary province to province.
Amount for an Eligible Dependent – You can claim if, during the relevant tax year, you supported an eligible dependent who made less than $11,809 (or $13,991 if they are dependent on you because they have a physical or mental impairment). This person may be a spouse or common-law partner, or another relative. In order to claim this amount, you will need to fill out Schedule 5.
Tuition, Education, and Textbook Amount – unlike its name, federally, the only tax credit available is for tuition, but some provinces/territories may have education or textbook credits still available.
Those are some of the most common non-refundable tax credits, but there are many more you may be eligible for at the federal, provincial and territorial levels. Here are some credits you should look into:
- Caregiver amount
- Disability amounts (or transfers)
- Medical Expenses
- Donation and gifts
- Volunteer firefighters’ amount
- Search and rescue volunteers’ amount
- Home accessibility expenses
- Home Buyer’s amount
Many of these non-refundable tax credits require you to fill out an additional form in order to claim it. Be sure to attach that form, or save yourself some headache and use TurboTax Online to do the work for you by searching over 400 deductions and credits you may qualify for.
What About My Allowable Amount of Non-Refundable Tax Credits?
At the federal level, the government places a maximum on how many non-refundable tax credits that a non-resident of Canada can claim (assuming they are electing until section 217). If you are a resident or citizen, this restriction does not apply to you and you can claim all of your non-refundable tax credits.