What’s the difference between a non-refundable and a refundable tax credit?
The key difference between a non-refundable and a refundable tax credit is that non-refundable tax credits are designed to reduce your tax payable to zero and don’t result in a tax refund. Refundable tax credits, on the other hand, not only reduce the amount of tax you have to pay, but any excess tax credit amount results in a tax refund from the government.
Example: Your tax owing for 2023 is $250; fortunately, you’re able to claim $600 in non-refundable tax credits on your return. While these credits will reduce your amount owing to zero, the remaining credit amount ($600 - $250 = $350) won’t be refunded to you.
As mentioned, refundable credits behave a little differently. Let’s assume that in addition to claiming the non-refundable credits in the previous example you were also able to claim $200 in refundable tax credits. Since your tax payable has already been reduced to zero by your non-refundable tax credits, you’ll get a refund of $200 for the total refundable credits amount.
What are some examples of non-refundable tax credits and can I transfer or carry forward unused credit amounts?
Some common non-refundable tax credits you might be familiar with include:
- Basic personal amount
- Age amount
- Spousal/common-law partner amount
- Tuition amount
- Medical expenses
- Charitable donations
Note: Eligibility requirements for these types of credits are based on your personal and family situation (things like your household income, number of family members that live with you, marital status, etc.).
Certain non-refundable tax credits can be carried forward for use in a future year or transferred to your spouse or common-law partner, if all or a portion of these amounts aren’t needed to reduce your own tax payable. Tax credits that can be carried forward to a future year include charitable donations and tuition amounts, and those that can be transferred to a spouse include the age amount, disability amount, and tuition amount. Refer to the Canada Revenue Agency (CRA) website for a full list of tax credits that can be claimed and how they work.
What are examples of refundable tax credits?
Here are a few examples of some refundable tax credits you might be claiming this year:
Note: Eligibility requirements for these types of credits are based on your personal and family situation (things like your household income, number of family members that live with you, marital status, etc.). Refer to the Canada Revenue Agency (CRA) website for a full list of tax credits that can be claimed and how they work.
