Non-Refundable Tax Credits

by Tax Guy - Burlington Accountant on February 1, 2011 Print This Post Print This Post

Tax credits and tax deductions are different. A tax deduction is deducted from your taxable income while a tax credit is a dollar-for-dollar reduction in the amount of income tax payable. The value of the tax credit is the same for everyone while a tax deduction can be worth more to those in higher tax brackets.

The majority of personal tax credits are considered non-refundable because they can only be used to reduce your tax payable to zero. If your tax credit exceed the amount of tax payable, you do not get a refund of the difference.

For example, if your basic federal tax as reported on Line 39 of Schedule 1 was $2,250 and your total non-refundable personal tax credits (Lines 300 to 350) totaled $3,000, your tax payable would only be reduced to zero and you would not get a refund of the $750.00 difference.

Another way of looking at non-refundable tax credits is that the government will only refund up to what you paid in tax.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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