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Your Guide to Non-Refundable Tax Credits

When you submit your completed income tax return, you’re presented with some deductions based on your income, expenses, investments, and other activities you were involved in. These deductions are also called tax credits.


Tax credits can significantly lower the amount of tax you owe. In some cases, they can also increase your tax refund amount. However, this depends on the type of tax credit in question. There are three types of tax credits: refundable, non-refundable, and partly refundable.


Non-Refundable Tax Credits


Non-refundable tax credits can only help reduce your tax owing (tax payable) to $0. If your tax owing is $0 and you still have credits remaining, the remaining amount won’t be refunded to you.


What this means is that non-refundable tax credits can’t help increase your tax refund. They also can’t be used to create a tax refund if you don’t already have one. The amount of tax you owe needs cannot be less than your savings. For instance, if you’re eligible for a $500 credit and you owe $200, the remaining $300 is non-refundable. The $200 tax will be eliminated from your record, but you won’t receive a tax refund for the remaining amount.


All Canadian taxpayers are eligible to receive a basic non-refundable tax credit on their income tax. This is known as the personal amount and it’s adjusted each year to account for inflation and other factors. Personal non-refundable tax credits may be federal, provincial, or territorial.


Refundable Tax Credits

Common Canadian Non-Refundable Tax Credits

There are different types of non-refundable tax credits:

Basic Personal Amount: As mentioned above, this is applicable to all Canadian taxpayers. The credit amount offsets the payable and increases every year. For Canadians based outside of Canada, a prorated amount can be claimed based on the number of days they lived in Canada during the taxation year.

Canada Employment Amount: Canadian taxpayers who have employment income are eligible for this tax credit. It’s used to offset the work-related costs and expenditures. Self employed individuals aren’t eligible for this tax credit.

Eligible Dependent Amount:  Individuals who supported an eligible dependant during the taxation year can this tax credit amount. It’s equal to the basic amount which is further decreased by the dependant’s income. An additional claim called the Canada Caregiver Amount can be filed if the dependent has a physical or mental impairment.

Here is a comprehensive list of some federal non-refundable tax credits that you can claim on your personal income tax return:

· Basic personal amount

· Age amount

· Spouse or common-law partner amount

· Amount for an eligible dependant

· Amount for infirm dependants age 18 or older

· Canada Pension Plan (CPP) or Québec Pension Plan (QPP) contributions through employment

· CPP or QPP contributions on self-employment and other earnings

· Employment insurance premiums through employment

· Adoption expenses

· Pension income amount

· Disability amount for self

· Disability amount transferred from a dependant

· Interest paid on your student loans

· Your tuition, education, and textbook amounts

· Tuition, education, and textbook amounts transferred from a student

· Amounts transferred from your spouse or common-law partner

· Donations and gifts

At Duggal Professional Corporation, we offer bookkeeping and tax services to businesses and individuals in Edmonton. We also provide thorough tax compliance services, payroll management and auditing services, and business consultancy services.

Get in touch with us today for more details about our tax and accounting consultancy in Edmonton.