Introduction to Personal Tax Credit

Taxation in Canada is build on laws, formulas, and logical reasoning. The Income Tax Act is the legal foundation providing both the principles and formulas. Reasoning and deductions are not enough to process tax return for an individual without knowledge of the laws. It's important to note that assumptions or incorrect tax filings can lead to serious penalties—making it clear that only qualified professionals should offer tax advice or process tax returns.

Canadian taxpayers in context are of two categories: individuals and corporations. A corporation is recognized as a separate legal entity. Corporations file their taxes using the T2 form, whereas individuals—including those operating as sole proprietors or in partnerships—file their taxes using the T1 form. Trusts, which are unique legal arrangements, use a different form and are taxed under specific rules.

A corporation is recognized as a separate legal entity, often treated as an individual for tax purposes. Corporations file their taxes using the T2 form, whereas individuals—including those operating as sole proprietors or in partnerships—file their taxes using the T1 form. Trusts, which are unique legal arrangements, use a different form and are taxed under specific rules.

We have prepared this infomercial to familiarize Scarborough residence with personal tax credits—a key component of the Canadian tax system. These credits reduce the amount of tax you owe based on your personal situation, but they will not generate a refund if your credits exceed your tax payable. Non-refundable credits must be used in the year they are claimed, although some can be carried forward to future years.

Each personal tax credit consists of four elements:

1. Eligibility - Determines who is eligible.
2. Base Amount - The dollar value used to calculate the credit.
3. Rate - A percentage applied to the base amount to calculate the actual credit.
4. Formula - Used to derive the final credit applied to your tax payable.

The base amount and the rate may change from year to year, depending on government policy and economic goals. Economists pay close attention to these variables, as they reflect fiscal strategies aimed at improving Canada's economic health.

Personal Tax Credit Table

Personal Tax Credit	Eligibility	Base amount	Rate	Formula
Basic personal amount, for those with income equal to or less than $173,205	Canadian resident	$15,705	15%	= (15%) ($15,705)
Basic personal amount, for those with income above $173,205 and up to $246,752	Canadian resident	$15,705	15%	= $15,705 - [1,549] * [(Net income - $173,205)/73,547]
Basic personal amount for those with net income equal to or above $246,752	Canadian resident	$14,156	15%	= (15%) ( $14,156)
Spousal Tax Credit	Legally married or in Common-law relationship Couples who lived together for at least 12 months or has a child together Spouse is healthy	$15,705	15%	= (15%) ($15,705 - Net income of spouse)
Spousal Tax Credit for a spouse with infirmity, an additional amount of $2,616 is provided to one eligible taxpayer	Legally married or in Common-law relationship Couples who lived together for at least 12 months or has a child together Spouse is infirm	$15,705	15%	= (15%) ($15,705 + $2,616 - Net income of spouse)
Dependant Person credit is provided to individual providing day-to-day direction and guidance and financial support for basic needs. Claim is limited to one dependant	Not married or single Separated & living apart from spouse Supports dependant family member Eligible dependant is taxpayer's parent or grandparent, related by blood, marriage, common-law partnership, adoption and a resident of Canada (except child) Eligible dependant lives with supporting individual in a self-contained domestic establishment, under eighteen or mentally/physically infirm Credit may be claimed for one family member	$15,705	15%	Eligible dependant credit- dependant not infirm: (15%) ($15,705 - eligible dependant's net income) Eligible dependant credit - dependant is infirm and not under eighteen: (15%) ($15,705 + $2,616 - eligible dependant's net income)
Canada caregiver amount for child	Child has mental or physical infirmity and under eighteen years of age at end of tax year Lives with both parents or single person who claims or could claim eligible dependant credit	$2,616	15%	= (15%) ($2,616)
Single Person tax credit	Single without spouse, common-law partner or eligible dependant	$15,705	15%	= (15%) ($15,705)
Canada Caregiver tax credit	Available to individual who supports a mentally or physically infirm eligible dependant Canada caregiver credit is reduced proportionately when spouse or eligible dependant's net income reaches $19,666	$8,375	15%	= (15%) ($8,375)
Age tax credit	Taxpayer is sixty-five years old Reduced proportionately when net income reaches $44,325 and is eliminated when net income is $102,925 Unused tax credit can be transferred to spouse	$8,790	15%	= (15%) ($8,790)
Pension Income tax credit	Taxpayer is sixty-five years old Eligible pension income includes most government pension payments The pension credit is not allowed for amounts received from the following: CPP, OAS, Certain provincial pension plans, Salary deferral arrangements, Retirement compensation arrangements, Employee benefit plans, and Death benefits	Maximum of $2,000 of eligible pension income	15%	= (15%) ($2,000)
Canada Employment tax credit	Available to all individuals with employment income	$1,433	15%	= (15%) ($1,433)
Adoption Expenses tax credit	Available to individual who adopts an “eligible child” Indexed credit base is up to $19,066 of eligible adoption expenses	$19,066	15%	= (15%) ($19,066)
Digital News Subscription tax credit	Temporary credit (2020 through 2024)	Maximum of $500	15%	= (15%) ($500)
Home Accessibility tax credit	Non-refundable tax credit for renovations that will allow seniors & persons with disabilities to live more independently at home Tax credit is available to a qualifying individual or an eligible individual for qualifying expenditures on an eligible dwelling	First $20,000 of renovation expenses	15%	= (15%) ($20,000)
First Time Home Buyer's tax credit	Available to first-time home buyer's who acquire a qualifying home in Canada Neither individual or spouse owned & lived in another home in year of purchase or any 4 preceding years Can be claimed by individual or spouse (or shared between them)	First $10,000 of cost of qualifying home	15%	= (15%) ($10,000)
Employment insurance tax credit	EI premiums Maximum tax credit for 2024 ($157)	Maximum of $1,049	15%	= (15%) ($1,049)
Canada Pension Plan tax credit	The maximum CPP contribution of $4,056 is split between a basic tax credit & other deduction	Maximum of $3,218	15%	= (15%) ($3,218)
Political Contributions tax credit	Canada Elections Act limits contributions to individuals Individuals limited to $1,725 for registered party, registered associations, nomination contestants & candidates of each registered party, leadership contestant, and independent candidate	$1,725	15%	= (15%) ($1,725)
Disability Tax credit	Impairment must be severe and prolonged that restricts basic living activities A continuous period of at least 12 months Supplement for disabled child under the age of eighteen at end of year Requires completed form T2201by medical doctor, nurse practitioner, or optometrist Can be transferred to individual making claim under ITA 118(1)(b) or 118(1)(d)	$9,872	15%	= (15%) ($9,872) Additional amount of $5,758 for disabled child under the age of eighteen at end of year that can be reduced by amount paid for attendant care or supervision

Some of the other tax credits are Medical Expenses tax credit, Charitable Donations tax credit, Tuition Fees tax credit, Dividend tax credit, Foreign tax credits, and Investment tax credits.

Published May 3, 2025

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