Non-Refundable Tax Credits

While income tax deductions are applied against your taxable income, non-refundable tax credits are applied against the amount of money you owe for taxes. For example, if you owe $10,000 in taxes, but have accumulated non-refundable tax credits of $2,000, you will only owe $8,000.

One thing about non-refundable tax credits is they can’t reduce the amount of tax owed to less than zero. Modifying the above example, if you owed $10,000 in taxes, but had non-refundable tax credits of $12,000, there would be a nil balance and you wouldn’t receive a cheque for $2,000 from Canada Revenue Agency (CRA).

Non-refundable tax credits can apply to many different aspects of our lives and include:

How do I determine the amount of a tax credit?

The amount is generally subject to a 15% rate and applied to reduce federal income taxes. In most instances, a similar provincial tax credit is also available to reduce provincial income taxes.