Income Tax Folio S1-F4-C2, Basic Personal and Dependant Tax Credits (for 2017 and subsequent tax years) 

Series 1: Individuals

Folio 4: Personal Credits

Chapter 2: Basic Personal and Dependant Tax Credits (for 2017 and subsequent tax years) 

Summary

Individuals are entitled to claim certain non-refundable tax credits in calculating taxes payable for a tax year. These credits reduce the amount of income tax an individual must pay. If the total of these credits is more than the income tax the individual would otherwise pay for the year, the individual will not get a refund for the difference.

This Chapter discusses the eligibility requirements and the amounts and calculations for the basic personal and dependant tax credits (which are collectively referred to as the personal tax credits) under subsection 118(1) including:

• the basic personal tax credit
• the spouse or common-law partner tax credit
• the eligible dependant tax credit
• the Canada caregiver tax credit (adult) (also referred to as the Canada caregiver tax credit for other infirm dependants 18 years of age or older)
• the Canada caregiver tax credit (child) (also referred to as the Canada caregiver tax credit for an infirm child under 18 years of age)

Bill C-44 was passed by Parliament on June 22, 2017. Because it made changes to simplify these personal tax credits for tax years after 2016, this Chapter has been added to reflect these changes. For tax years before 2017, please refer to Income Tax Folio S1-F4-C1, Basic Personal and Dependant Tax Credits (for 2016 and prior tax years).

Information on the medical expense tax credit, disability tax credit, qualifying student and the education and textbook tax credits, and tuition tax credit can be found in other Folio chapters. Information on the remaining tax credits for individuals can be found in the General income tax and benefit package for the relevant tax year.

The Canada Revenue Agency (CRA) issues income tax folios to provide a summary of technical interpretations and positions regarding certain provisions contained in income tax law. Due to their technical nature, folios are used primarily by tax specialists and other individuals who have an interest in tax matters. While each paragraph in a chapter of a folio may relate to provisions of the law in force at the time it was written (see the Application section), the information provided is not a substitute for the law. The reader should, therefore, consider the chapter’s information in light of the relevant provisions of the law in force for the particular tax year being considered.

The CRA may have published additional guidance and detailed filing instructions on matters discussed in this Chapter. See the CRA forms and publications web page for this information and other topics that may be of interest.

Discussion and interpretation

Calculation of credits

2.1 Subsection 118(1) sets out the formulas for calculating the basic personal tax credit, the spouse or common-law partner tax credit, the eligible dependant tax credit, and the Canada caregiver tax credit (adult) and Canada caregiver tax credit (child).

2.2 The personal tax credits for an individual are calculated by multiplying the total of the applicable dollar amounts for each of the personal tax credits by the lowest tax rate referred to in subsection 117(2). The lowest tax rate is 15% for years after 2006. The dollar amounts of the different personal tax credits are set out in the relevant provisions of subsection 118(1). Where applicable, the amounts are reduced by the income for the year (in excess of certain limits) of the spouse or common-law partner or the dependant.

Annual indexation

2.3 The dollar amounts and the income limits for each of the personal tax credits are subject to annual indexation. Basically, under section 117.1, these amounts will be increased to reflect inflation based on the increase, if any, in the Consumer Price Index. The CRA’s indexation chart provides these indexed amounts for each of the personal tax credits for the last four tax years.

2.15 For the purposes of the personal tax credits under subsection 118(1), when a marriage or common-law partnership has been dissolved by death, the family relationships created by the marriage or common-law partnership are considered to continue to exist. For example, a man or woman is considered to remain a child of his or her deceased spouse's mother or father. However, if a marriage or common-law partnership ends for a reason other than death, such as divorce, annulment, or separation, the family relationships created by the marriage or common-law partnership cease to exist.

2.19 Whether an individual supports another individual is a question of fact. A person is generally dependent for support on an individual if the individual has actually supplied necessary maintenance, or the basic necessities of life to the person on a regular and consistent basis. The basic necessities of life are generally understood to include food, shelter and clothing.

2.20 An individual might contribute amounts to a household which can be regarded as being for their own accommodation and meals. In this situation, the amounts should not be considered to have been paid by the individual for the support of another person in the household.

2.21 The term mental or physical infirmity is not specifically defined for the purposes of subsection 118(1). Therefore, it takes its ordinary meaning. For a person to be dependent on an individual because of mental or physical infirmity, the dependency must be brought about solely by reason of the infirmity. The degree of the infirmity must be such that it requires the person to be dependent on the individual for a considerable period of time. Temporary illness or injury is not considered to be an infirmity for purposes of the personal tax credits.

2.22 The Canada caregiver tax credit replaces the caregiver tax credit, the infirm dependant tax credit and the family caregiver tax credit for the 2017 and subsequent tax years. The Canada caregiver tax credit may be claimed for certain dependants with a mental or physical infirmity and consists of:

• an amount for certain dependants 18 years of age or older, referred to in this Chapter as the Canada caregiver tax credit (adult) and
• an amount for a child under 18 years of age, referred to in this Chapter as the Canada caregiver tax credit (child) (formerly family caregiver tax credit).

2.23 An additional Canada caregiver amount is available as part of the calculation to determine the spouse or common-law partner tax credit (see ¶2.28) and the eligible dependant tax credit (see ¶2.43) in respect of a spouse or common-law partner or an eligible dependant with a mental or physical infirmity. The requirements for claiming this additional amount are discussed in each of the specific tax credit sections in this Chapter.

2.24 The term self-contained domestic establishment is defined in subsection 248(1). It means a dwelling-house, apartment or other similar place of residence in which a person as a general rule sleeps and eats. The size of the establishment is of no consequence and even a one-room bachelor apartment could qualify if it is self-contained. Generally, a self-contained domestic establishment is a living unit with restricted access that contains a kitchen, bathroom and sleeping facilities. A room (or rooms) in a hotel or boarding house would not ordinarily be a self-contained domestic establishment.

Basic personal tax credit

2.25 An individual is entitled to a basic personal tax credit under paragraph (c) of the description of B in subsection 118(1). This credit is calculated using the formula:
A × B

where:  

A is the Basic personal amount

B is the lowest tax rate (15% for years after 2006).

Spouse or common-law partner tax credit

2.26 An individual may be entitled to claim a spouse or common-law partner tax credit under paragraph (a) of the description of B in subsection 118(1). The credit is available if at any time in the year the individual:

• is married or is in a common-law partnership;
• supports their spouse or common-law partner; and
• is not living separate and apart from that spouse or common-law partner because of a breakdown of their marriage or common-law partnership.

2.27 The spouse or common-law partner tax credit is calculated using the following formula:

(C − D) × E

where:

C is the applicable maximum spouse or common-law partner amount (see ¶2.28)

D is the amount, if any, of the spouse or common-law partner’s income for the year (see ¶2.29); and

E is the lowest tax rate (15% for years after 2006).

2.28 The maximum spouse or common-law partner amount available to the individual depends on whether the individual is eligible for the Canada caregiver amount. The Canada caregiver amount is available to the individual as part of the spouse or common-law partner tax credit when an individual’s spouse or common-law partner is dependent on the individual because of a mental or physical infirmity. If an individual is eligible to claim the Canada caregiver amount, the individual would use the Spouse or common-law partner amount (maximum if eligible for the Canada caregiver amount for a dependent spouse or common-law partner) for variable C in the formula described in ¶2.27. Otherwise the individual would use the Spouse or common-law partner amount (maximum). An example of the calculation can be found in Example 5.

2.29 An individual’s claim for the spouse or common-law partner tax credit will be reduced if the spouse or common-law partner has income for the year. It will be eliminated when the income is equal to or greater than the spouse or common-law partner amount for the year used in variable C in the formula described in ¶2.27.

2.30 Either spouse or common-law partner (but not both) may claim a spouse or common-law partner tax credit in respect of the other, provided the spouse or common-law partner making the claim supported the other.

Changes to relationship status

2.31 The requirements for claiming the spouse or common-law partner tax credit only need to be met at some point in the year. This means that the credit may be available in a year in which an individual marries or becomes a common-law partner. Similarly, the credit may be available in a year in which a breakdown in a marriage or common-law partnership occurs.

2.32 It should be noted however, that if the individual is required to pay a support amount in respect of a former spouse or common-law partner in the year of the breakdown of a relationship, the individual must choose whether to claim the spouse or common-law partner tax credit, or the deductible support amounts for the year. The individual can claim whichever is more beneficial. Income Tax Folio S1-F3-C3, Support Payments provides information about support amounts.

2.33 Where two individuals are living separate and apart at the end of a year because of a breakdown of their marriage or common-law partnership that occurred in the year, only the income for the period of the year before the breakdown is included in the calculation of the spouse or common-law partner tax credit. In all other cases, the income of the spouse or common-law partner for the entire tax year must be taken into account in calculating the spouse or common-law partner tax credit.

2.34 The determination of whether individuals live separate and apart as a result of a breakdown of their relationship is a question of fact. Where a separation is for reasons other than a breakdown of the relationship, the individuals would not be considered to be living separate and apart for purposes of the spouse and common-law partner tax credit. This may be the case, for example, where there is a separation for attendance at school or for work, or where there is an involuntary separation such as for medical reasons or incarceration.

Taxable dividends received by a spouse or common-law partner

2.35 Under subsection 82(3), an individual can elect to have all taxable dividends from taxable Canadian corporations received by their spouse or common-law partner included in the individual’s income for the year. In order to make this election, the inclusion of the dividends in the individual’s income must result in an increase in the individual’s spouse or common-law partner tax credit. If the individual elects to include these dividends in their income, the dividends are excluded from their spouse or common-law partner’s income. This allows the individual to maximize the spouse or common-law partner tax credit and dividend tax credit for the year. Subsection 82(3) is discussed in Interpretation Bulletin IT-295R4, Taxable Dividends Received after 1987 by a Spouse.

2.38 If an individual is entitled to claim a spouse or common-law partner tax credit for a person, paragraph 118(4)(c) prevents any individual from claiming the Canada caregiver tax credit (adult) for that same person for the tax year. However, an individual may be able to claim an additional tax credit under paragraph (e) of the description of B in subsection 118(1) as well as the spouse or common-law partner tax credit. This additional credit may be claimed if the restriction in paragraph 118(4)(c) results in the spouse or common-law partner tax credit being less beneficial to the individual compared to claiming the Canada caregiver tax credit (adult) for that same person. This would occur when the dependant’s income is enough to reduce the individual's spouse or common-law partner tax credit below the amount of Canada caregiver credit that would be available.

2.39 There are certain restrictions in subsection 118(5) that can prevent an individual from claiming a personal tax credit under subsection 118(1) (such as the spouse or common-law partner tax credit) for a particular person for a tax year. These restrictions apply if the individual is required to pay a support amount for that person to his or her current or former spouse or common-law partner. For an exception to these restrictions in the year of a breakdown in a marriage or common-law partnership, refer to ¶2.31 and 2.32. For more information regarding these restrictions, refer to ¶3.73 to 3.77 of Income Tax Folio S1-F3-C3.

Support of an eligible dependant

2.47 For an individual to claim the eligible dependant tax credit, a person must be wholly dependent for support on the individual. As discussed in ¶2.18, support involves providing the basic necessities of life, such as food, shelter, and clothing. Wholly dependent for support on the individual generally means the person is financially dependent on the individual such that the individual provides almost entirely for the person’s well-being. For example, in order for a child to be considered wholly dependent for support on a parent, the parent must be responsible for the usual day-to-day activities of raising the child, such as ensuring the child attends school, and providing necessities such as food, shelter and clothing.

2.48 Where an individual receives support payments from a government agency responsible for a person’s care, in order to care for that person, the person is generally not considered to be wholly dependent for support on the individual. For example, a foster child is not considered to be wholly dependent for support on a foster parent who receives payments from an agency responsible for the child’s care.

2.49 A child born alive (even if alive only briefly after birth) is considered to be dependent for support on an individual. An individual may claim the eligible dependant tax credit for a newborn child provided the other requirements to claim that credit are met.

2.50 An individual may support an eligible dependant who moves away to attend school. If the eligible dependant ordinarily lives with the individual during the year when not in school, and the other requirements to claim the eligible dependant tax credit are met, the individual may claim the eligible dependant tax credit for that person.

Limitations affecting the eligible dependant tax credit

2.51 Paragraph 118(4)(a) prevents an individual from claiming an eligible dependant tax credit in a tax year for more than one person.

2.52 As noted in ¶2.37, an individual cannot claim the eligible dependant tax credit for the year if they claim a spouse or common-law partner tax credit in that year. An individual may choose to claim either the spouse or common-law partner tax credit or the eligible dependant tax credit in a tax year if the requirements for both credits are met. The individual can choose whichever is more beneficial to claim for the year.

2.53 Paragraph 118(4)(a.1) also prevents an individual from claiming an eligible dependant tax credit in a tax year for a person if:

• another individual is claiming the spouse or common-law partner tax credit for that same person, and
• that person and the other individual are married or in a common-law partnership throughout the year and are not living separate and apart because of a breakdown of their relationship.

2.54 Under paragraph 118(4)(b) only one individual can claim the eligible dependant tax credit:

• for a particular person; or
• within the same domestic establishment.

2.55 This means that if more than one individual is entitled to claim the eligible dependant tax credit for the same person, only one of those individuals can claim the credit in respect of that person. Similarly, if two or more individuals jointly maintain a domestic establishment where they reside, and more than one individual in that domestic establishment is eligible to claim an eligible dependant tax credit for an eligible dependant living there, only one individual can make a claim for the credit in the tax year.

2.56 In either case discussed in ¶2.54 and 2.55, the eligible dependant tax credit may only be claimed by one individual. The credit cannot be shared by having individuals each claim a portion of the credit on their returns, even if there is agreement to share the claim. If the individuals are unable to agree as to who should claim the tax credit, neither can claim it.

2.57 Where parents live separate and apart due to a breakdown in their marriage or common-law partnership, and share custody of two or more minor children, one parent may be able to claim the eligible dependant tax credit for one child, and the other parent may be able to claim the credit for another child. However, a particular parent must meet all of the requirements to claim a particular child and ensure that the limitations listed in subsections 118(4) and 118(5) do not apply. See ¶2.59 for a discussion of subsection 118(5).

2.58 If an individual is entitled to claim an eligible dependant tax credit for a person, paragraph 118(4)(c) prevents any individual from claiming the Canada caregiver tax credit (adult) for that same person for the tax year. However, an individual may be able to claim an additional tax credit under paragraph (e) of the description of B in subsection 118(1) as well as the eligible dependant tax credit. This additional credit may be claimed if the restriction in paragraph 118(4)(c) results in the eligible dependant tax credit being less beneficial to the individual compared to claiming the Canada caregiver tax credit (adult) for that person. This would occur when the dependant’s income is enough to reduce the individual's eligible dependant tax credit below the amount of Canada caregiver tax credit (adult) that would be available.

2.59 There are certain restrictions in subsection 118(5) that can prevent an individual from claiming a personal tax credit under subsection 118(1) (such as the eligible dependant tax credit) for a particular person for a tax year. These restrictions apply if the individual is required to pay a support amount for that person to his or her current or former spouse or common-law partner. For more information regarding these restrictions, refer to ¶3.73 to 3.77 of Income Tax Folio S1-F3-C3.

Canada caregiver tax credit (adult)

2.60 The Canada caregiver tax credit (adult) is provided under paragraph (d) of the description of B in subsection 118(1). This credit is also referred to as the Canada caregiver tax credit for other infirm dependants 18 years of age or older. An individual may claim the credit for each cared-for person in the tax year. A cared-for person is a person who, at any time in the year, is dependent on the individual because of a mental or physical infirmity and is either:

• a spouse or common-law partner of the individual, or
• 18 years of age or older before the end of the year and dependent for support on the individual and is:
  1. the child or grandchild of the individual or of the individual’s spouse or common-law partner; or
  2. resident in Canada at any time in the year and is the parent , grandparent, brother, sister, uncle, aunt, niece or nephew of the individual or of the individual’s spouse or common-law partner.

2.61 It is not necessary that the cared-for person live in the same residence as the individual for the purposes of this credit.

2.62 The Canada caregiver tax credit (adult) is calculated for each cared-for person using the following formula:
(I − J) × K

where:  

I is the Canada caregiver amount for other infirm dependants age 18 or older (maximum amount);

J is the amount, if any, of the cared-for person’s income in excess of the Net income threshold for Canada caregiver amount (see ¶2.63); and

K is the lowest tax rate (15% for years after 2006).

2.63 If the cared-for person’s income is less than the Net income threshold for Canada caregiver amount, the cared-for person’s income will not reduce the amount of the individual's Canada caregiver tax credit (adult). In other words, the cared-for person’s income will only reduce the amount of the individual's Canada caregiver tax credit (adult) when it is greater than the threshold.

Limitations affecting the Canada caregiver tax credit (adult)

2.64 If an individual is entitled to claim a spouse or common-law partner tax credit or an eligible dependant tax credit for a person, paragraph 118(4)(c) prevents any individual from claiming the Canada caregiver tax credit (adult) for that same person for the tax year.

2.65 The restriction discussed in ¶2.64 might result in the spouse or common-law partner tax credit or the eligible dependant tax credit being less than what would have been available if claiming the Canada caregiver tax credit (adult). In that case, in addition to either the spouse or common-law partner tax credit or the eligible dependant tax credit, the individual may be able to claim an additional tax credit under paragraph (e) of the description of B in subsection 118(1). This additional tax credit is equal to the amount by which the Canada caregiver tax credit (adult) that the individual would have been able to claim exceeds the spouse or common-law partner or eligible dependant tax credit being claimed. See Examples 5 and 9.

2.66 Where two or more individuals are entitled to a Canada caregiver tax credit (adult) for the same dependant in a tax year, the Canada caregiver tax credit (adult) may be shared by those individuals. Under subparagraph 118(4)(d)(i), the total amount claimed by all individuals for the Canada caregiver tax credit (adult) for a particular dependant cannot be more than the amount that would have been claimed if only one individual had made the claim. If individuals cannot agree as to what portion of the tax credit each can claim, subparagraph 118(4)(d)(ii) allows the Minister of National Revenue to determine the portions.

2.67 There are certain restrictions in subsection 118(5) that can prevent an individual from claiming a personal tax credit under subsection 118(1) (such as the Canada caregiver tax credit (adult)) for a particular person for a tax year. These restrictions apply if the individual is required to pay a support amount for that person to his or her current or former spouse or common-law partner. For more information regarding these restrictions, refer to ¶3.73 to 3.77 of Income Tax Folio S1-F3-C3.

Canada caregiver tax credit (child)

2.68 An individual may be entitled to claim the Canada caregiver tax credit (child) under paragraph (b.1) of the description of B in subsection 118(1). This credit is also referred to as the Canada caregiver tax credit for an infirm child under 18 years of age. It is available for each child of the individual:

• under the age of 18 at the end of the tax year; and
• who, by reason of mental or physical infirmity, is likely to be, for a long and continuous period of indefinite duration, dependent on others for significantly more assistance in attending to the child’s personal needs and care, when compared to children of the same age.

2.69 In addition to the requirements described in ¶2.68, one of the following three conditions must be met for each child in order for the individual to claim the Canada caregiver tax credit (child) for that child:

1. The child ordinarily resides with the individual throughout the tax year together with another parent of the child.
2. The child did not ordinarily reside throughout the year with the individual and another parent of the child, and the individual is entitled to claim the eligible dependant tax credit for that child.
3. The child did not ordinarily reside throughout the year with the individual and another parent of the child, and the individual would have been entitled to claim the eligible dependant tax credit for that child if any of the following applied:
   • the individual had not made a claim for the tax year for the spouse or common-law partner tax credit or the eligible dependant tax credit for another dependant;
   • the individual had not lived in the same domestic establishment with another individual who claimed the eligible dependant tax credit for another dependant for the tax year; or
   • the child had no income for the tax year (for example, the child did not have income for the year that was equal to or greater than the maximum amount for an eligible dependant).

2.70 For the purposes of the Canada caregiver tax credit (child), subsection 118(9.1) states that where a child is born, adopted or dies during the year, the phrase throughout the year means throughout the portion of the year that is after the child’s birth or adoption or before the child’s death. This means that the requirement described in ¶2.69(a) can be met if the child ordinarily resides with the individual and another parent of the child throughout the portion of the year after birth or adoption or before death.

2.71 The Canada caregiver tax credit (child) is calculated using the following formula:

L × M

where:

L is the Canada caregiver amount for children under age 18

M is the lowest tax rate (15% for years after 2006).

Limitations affecting the Canada caregiver tax credit (child)

2.72 Paragraph 118(4)(b.1) prevents more than one individual from claiming the Canada caregiver tax credit (child) for the same child. Where two or more individuals are entitled to claim the credit for a particular child, the individuals must agree on who will claim the credit for the year. In situations where the individuals cannot agree on who will claim the credit for the year, no credit will be allowed for either individual.

2.73 There are certain restrictions in subsection 118(5) that can prevent an individual from claiming a personal tax credit under subsection 118(1) (such as the Canada caregiver tax credit (child)) for a particular person for a tax year. These restrictions apply if the individual is required to pay a support amount for that person to his or her current or former spouse or common-law partner. For more information regarding these restrictions, refer to ¶3.73 to 3.77 of Income Tax Folio S1-F3-C3.

Application

This Chapter, which may be referenced as S1-F4-C2, is effective August 5, 2020. This Chapter replaces Income Tax Folio S1-F4-C1, Basic Personal and Dependant Tax Credits (for 2016 and prior tax years) for 2017 and subsequent years.

Any technical updates from Income Tax Folio S1-F4-C1, Basic Personal and Dependant Tax Credits (for 2016 and prior tax years) can be viewed in the Chapter History page.

Except as otherwise noted, all statutory references herein are references to the provisions of the Income Tax Act, R.S.C., 1985, c.1 (5th Supp.), as amended and all references to a Regulation are to the Income Tax Regulations, C.R.C., c. 945, as amended.

Links to jurisprudence are provided through CanLII.

Income tax folios are available in electronic format only.

Reference

Subsections 118(1), 118(4), 118(5), 118(6), and the definitions of common-law partner and self-contained domestic establishment in subsection 248(1) (also section 117.1, subsections 82(2), 117(2), 250(1), 252(1), and 252(2)).

Income Tax Folio S1-F4-C1, Basic Personal and Dependant Tax Credits (for 2016 and prior tax years)

Income Tax Folio S5-F1-C1, Determining an Individual’s Residence Status

Income Tax Folio S1-F3-C3, Support Payments

Interpretation Bulletin IT-295R4, Taxable Dividends Received after 1987 by a Spouse