8.3.6 Non-refundable and refundable tax credits 

Non-refundable tax credits

All taxpayers can claim a basic non-refundable tax credit for their income tax, known as the personal amount. It is adjusted annually to allow for inflation and other factors, but in 2023 the personal amount for federal taxes was $15,000. Each province and territory also sets a personal amount for provincial or territorial taxes.

Each government allows taxpayers to claim a percentage of their non-refundable total tax credits, and reduce their taxes payable by that amount. The federal government allows taxpayers to claim 15 percent of their non-refundable tax credits.

Example: Martin had a taxable income of $39,000 in 2023. The federal income tax he would pay on that income is $5,850. The tax credit for his federal personal amount is $15,000, and he can claim 15 percent of it, or $2,250.00. This tax credit reduces his federal income tax to $3,600.00.

Similar calculations are used to calculate Martin's other non-refundable tax credits and tax credits for provincial or territorial income taxes. Because these credits are non-refundable, you don't receive a tax refund if they total an amount larger than the taxes you owe.

In addition, people in certain categories are entitled to additional personal exemptions. For example, on your 2023 federal income tax return:

• if you earned income from a job, you can claim up to $1,368
• if you are over the age of 65, you can claim up to $8,396
• if you have children, you can claim $2,499 for each child under the age of 18
• if you receive a pension, you can claim up to $2,000
• if you have a disability, you can claim up to $9,428
• if you care for a dependent who is infirm, you can claim up to $7,999

Some of these exemptions can be transferred to another taxpayer. For example, a dependent student can transfer the education amount to a parent, who can use it to reduce his or her own income.

Step 5 - Part B of the T1 tax return lists the non-refundable federal income tax credits (see illustration). Review the non-refundable tax credits listed in the illustration and make a note of any that you think apply to you.

Non-refundable tax credits are available only when you meet specific conditions, so check the tax guide to be sure that they apply.  For more information, go to Canada Revenue Agency's General income tax and benefit package or get a copy of the guide at your local post office.

Refundable tax credits

Refundable tax credits are credits that will be paid to you if you are eligible. Often the federal or provincial government pays them to you in a series of payments through the year to assist with living expenses.

Federal refundable tax credits include:

• the goods and services tax/harmonized sales tax (GST/HST) credit
• the Working Income Tax Credit.

Some provinces also offer refundable tax credits that apply to provincial or territorial income tax.