Ontario Non-Refundable Tax Credits (Updated for 2024)

As step into the fiscal terrain of 2023/2024, understanding Ontario Non-Refundable Tax Credits becomes paramount. These credits, woven intricately into the provincial tax system, serve as essential components in the financial tapestry of Ontarians’ lives.

For the 2023/2024 tax year, the Ontario provincial tax system has seen some key changes. The personal income levels used to calculate your Ontario tax have been revised, along with adjustments to the amounts for most provincial non-refundable tax credits, while the Ontario seniors’ home safety tax credit, Ontario jobs training tax credit, and Ontario staycation tax credit are no longer available for 2023 and subsequent tax years.

This article will be your comprehensive guide to Ontario’s non-refundable tax credits, eligibility requirements, and the latest updates implemented for the 2023/2024 tax year.

Fundamentals of Non-Refundable Tax Credits

Non-refundable tax credits like coupons you use to directly reduce your tax bill. They lower the amount of money you owe the government, these credits directly reduce your tax owed.

• Imagine you owe $100 in taxes.
• If you qualify for a $50 non-refundable credit, it acts like a discount. You’d only owe $50 in taxes instead.

Limitations

Non-refundable tax credits are great for reducing your tax bill, but with limitations:

• No refund: Even if the credit exceeds your tax bill, you won’t get extra money back.
• Use It or Lose It: The credit only saves you money on taxes you already owe. You can’t use any leftover credit amount.

Overview of Ontario’s Non-Refundable Tax Credits

Ontario’s non-refundable tax credits are crucial for the province’s tax system, offering various benefits to eligible individuals and families. These tax credits aim to reduce the amount of tax payable, though they cannot bring the tax owed below zero.

Some of the tax credits that can be claimed in Ontario include:

Families Tax (LIFT) credit:

The low-income individual and families Tax( LIFT) credit is a non-refundable tax credit for low-income families in Ontario to reduce their provincial tax payable. 

To claim you must be a resident of Canada at the beginning of the year and resident of Ontario in December 2021. You must have employment income and owe Ontario personal income tax.  If you have a spouse or common-law partner with employment income, they can also claim this credit. To claim a complete schedule ON428-A enter the amount on line 62140 of your Form ON428.

Ontario caregiver amount:

This is a non-refundable credit for individuals who have prolonged physical and mental disease. To claim a tax credit for a dependent relative with a mental or physical impairment. This includes relatives aged 18 or older, such as children, parents, siblings, or grandparents, who lived in Canada during the year. 

You can claim this credit if your relative meets the criteria for being your eligible dependant or other infirm dependant, and their net income is below $23,217. 

Retirement or Pension Plan Credit:   

Pension plan credit is for only residents of Ontario. This credit allows individuals to claim deductions for contributions made to retirement or pension plans, including the Canada Pension Plan (CPP), Quebec Pension Plan (QPP), and certain foreign pension plans or social security arrangements. The amount eligible for the credit is based on the contributions made during the tax year.

 Home Accessibility Expenses Credit: 

Individuals can claim this credit for expenses incurred to make a home more accessible for a person with a disability. Eligible expenses may include renovations or modifications to improve accessibility, such as installing wheelchair ramps, grab bars, or accessible bathroom fixtures.

Disability amount for self: 

To claim the non-refundable Disability amount for self-tax credit in Ontario, apply for the Disability Tax Credit (DTC) through the CRA. If approved, include $9,428 on line 31600 of your 2023 tax return. If you don’t require the full amount, transfer the remainder to a supporting family member. The Disability Tax Credit reduces the amount of tax owed but isn’t refunded. You can retroactively claim the DTC for up to 10 years if eligible but unclaimed in past years.

Adoption Expenses: 

The Adoption Expenses Credit is a non-refundable tax credit for individuals who incur expenses related to the adoption of a child, including agency fees, legal costs, and travel expenses. 

You’re eligible to claim this amount if you meet the criteria for claiming the amount on line 31300 of your return. For each child, you can claim up to $13,593 of eligible adoption expenses in the year the adoption is finalized or recognized in Ontario. If both parents adopt, they can share the claim as long as it doesn’t exceed the total eligible expenses for each child before the split.

Charitable Donation Tax Credit: 

The Charitable Donation Tax Credit is a non-refundable tax credit that incentivizes taxpayers in Ontario to donate to eligible charities and qualified donees. This credit encourages charitable giving by providing tax benefits for contributions to support various charitable causes and organizations. 

You can claim the credit on their federal and provincial tax returns, with rates varying by province. Taxpayers can carry forward unused credits for up to five years. The credit cannot exceed 75% of the individual’s net income, and they must make donations to registered charities.

These federal non-refundable tax credits can be claimed in Ontario, subject to specific eligibility criteria and rules. It is essential to keep detailed records of expenses and contributions to support these claims during tax filing.

How Tax Rates Are calculated?

Tax authorities calculate non-refundable tax rates based on income after deducting expenses.

The tax rate applies to the taxable income to determine the owed tax amount. If the tax paid exceeds the owed amount, the extra money cannot be returned. Instead, it may reduce the owed tax amount in future years. 

For example, if a taxpayer owes $500 in taxes and receives a $600 non-refundable tax credit, the taxpayer will still only owe $0 in taxes, but will not receive a refund for the remaining $100 of the credit. This is different from refundable tax credits, which can result in a tax refund if the total of these credits is greater than the tax owed.

You can figure out your non-refundable tax rate using TaxTool.ca.

How to Claim Non-Refundable Tax Credits

To claim non-refundable tax credits, you can follow the below steps:

Federal Return: 

To claim non-refundable tax credits for Ontario on your federal return, you need to follow specific guidelines based on your residency status and income sources. 

If you are a non-resident or a non-resident electing under section 217, the federal non-refundable tax credits you can claim depend on the percentage of your net world income. You can claim all applicable federal non-refundable tax credits if your net world income is 90% or more. However, if it is less than 90%, you can only claim specific credits like tuition amounts, medical expenses, and charitable donations.

Newcomers and emigrants can claim full federal non-refundable tax credits if 90% or more of their income is from Canadian sources for the year. Include a note with your paper return detailing your net world income and income from both Canadian and non-Canadian sources for that period.

Report foreign income accurately. Use your SIN or ITN and T4 slip for filing. These steps ensure compliance with Canadian tax laws

Provincial Return : 

The second step in claiming non-refundable tax credits in Ontario’s provincial return involves filling out  Form ON428. This step requires you to calculate and report your provincial non-refundable tax credits, following the eligibility conditions and rules that are similar to federal non-refundable tax credits. 

It’s important to note that while the eligibility conditions are alike, the amount and calculation of most Ontario non-refundable tax credits differ from the corresponding federal credits. 

This step is crucial in accurately claiming the tax credits you are eligible for in your Ontario provincial return.

Part B-Ontario Non-Refundable Tax Credits: 

Taxpayers claim Ontario’s non-refundable tax credits in Part B of the Ontario tax return form (Form ON428). They resemble federal credits in eligibility and claiming rules, but amounts and calculations may vary.

To claim these credits, individuals must fill out specific details related to eligible expenditures and work placements, if applicable.

Newcomers to Canada for emigrants may face limitations on the amount they can claim for certain provincial non-refundable tax credits. It’s crucial to ensure accurate reporting to benefit from these tax-saving opportunities in Ontario.

Adjustments for Certain Provincial Credits: 

This step involves adjustments for certain provincial credits. Emigrants may face restrictions on certain provincial non-refundable tax credits, so they must claim them accordingly, similar to federal ones. 

Taxpayers may need to adjust if federal amounts are reduced. If an emigrant reduces their claim for federal non-refundable amounts, they should also reduce their claim for the corresponding provincial/territorial amounts.

This ensures that claimed tax credits align with the emigrant’s status and Canadian income.

Keeping Receipts: 

It is essential to keep receipts of transportation expenses and other eligible medical expenses. These receipts should include details like the amount, date, and type of transaction. Moreover, they serve as evidence for claiming certain tax credits related to transportation expenses. 

Furthermore, the driver or caregiver can also claim out-of-pocket expenses such as mileage, meals, and lodgings. However, it is essential to ensure that all expenses are eligible for deduction under the tax laws.

Key Tax Deadlines for Non-refundable Tax Credit

Here are the key tax filing dates for Ontario residents :

• April 30, 2024: This is the deadline for most taxpayers to submit their tax returns.
• June 15, 2024: Self-employed individuals or those with self-employed spouses or partners have until this date to file taxes.
• April 30, 2024: Pay any owed taxes for the 2023 tax year by this date to avoid interest and penalties.

For a comprehensive overview of tax filing deadlines and important dates, you can opt for the CRA’s tax filing calendar.

If you miss the tax deadlines in Ontario, the Canada Revenue Agency (CRA) imposes penalties and interest on late tax filing and payments. 

The penalty and interest charges are meant to encourage timely filing and payment of taxes. It is crucial to file taxes on time to avoid penalties and interest charges, as they can significantly increase the amount owed to the CRA. The penalty for late filing is 5% of the tax owed, plus an additional 1% for each full month of delay, up to a maximum of 12 months. 

Ontario’s non-refundable tax credits provide an opportunity to lower your tax liability. While these credits effectively decrease the amount you owe, they do not generate a refund. 

Individuals new to Ontario can refer to the Ontario guide for further details.

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