What Are Non-Refundable Tax Credits?

Non-refundable tax credits are credits that reduce your tax liability but cannot bring it below zero. In other words, if your tax payable is less than the amount of the non-refundable tax credit, the unused portion is not refunded to you. These credits are designed to reduce the tax you owe, but are limited by the amount of taxes you need to pay. For example, if you owe $1,000 in taxes but have $1,200 in non-refundable tax credits, your tax liability would be reduced to zero, but you wouldn’t receive the remaining $200.

Some common non-refundable tax credits are:

• Basic Personal Amount: This is the most common non-refundable tax credit. It is a tax-free allowance that every Canadian taxpayer can claim. Note that the provincial basic personal amounts vary, and many provinces have their own set amounts.

• Spousal/Common-Law Partner Amount: If you are supporting a spouse or common-law partner with low or no income, you may qualify for a tax credit.

• Age Amount: If you're 65 years of age or older, you can claim the age amount, which reduces your taxable income.

• Disability Amount: If you have a severe and prolonged physical or mental impairment, you may qualify for the disability tax credit. This amount can be claimed by the person with the disability or a supporting family member (such as a parent).

• Canada Employment Amount: This is a tax credit available to individuals who are employed. It's designed to help offset costs related to employment, like work-related clothing or supplies.

• Medical Expenses: If you have significant medical expenses not covered by insurance, you may be eligible to claim a tax credit. The medical expenses must exceed a certain threshold (usually 3% of your income or a fixed amount).

• Charitable Donations: Donations to registered charities can reduce your tax payable.

What Are Refundable Tax Credits?

Refundable tax credits are more generous than non-refundable credits. Unlike non-refundable credits, refundable tax credits can reduce your tax payable to below zero, meaning you can receive a refund for any excess credit that exceeds your tax liability. In short, refundable credits are a direct way to receive a cash refund if the credit exceeds the taxes owed.

Some common refundable tax credits are:

• GST/HST Credit: The Goods and Services Tax (GST) / Harmonized Sales Tax (HST) credit is designed to provide financial assistance to low- and modest-income Canadians. The amount of the credit depends on your family income and the number of children in your household. 

• Working Income Tax Benefit (WITB) / Canada Workers Benefit (CWB): The Working Income Tax Benefit is designed to provide financial support to low-income workers. This refundable tax credit is designed to make it more worthwhile for individuals to work rather than relying on social assistance.

• Canada Child Benefit (CCB): If you have children under 18, the Canada Child Benefit is a non-taxable monthly payment that you may be eligible for. It is income-tested, meaning higher-income families may receive lower benefits. 

• Social Assistance (Provincial Credits): Many provinces have their own refundable tax credits for low-income individuals or those receiving social assistance. These credits may be designed to help with expenses such as childcare, tuition, or basic living costs.

Refundable Provincial Tax Credits: In addition to federal refundable tax credits, each province has its own set of refundable tax credits. For instance, British Columbia offers a refundable BC Low-Income Climate Action Tax Credit. At the same time, Quebec has various refundable credits aimed at specific tax relief, such as those for seniors or energy efficiency upgrades.