Personal Finance

Can someone please explain exactly what a non-refundable tax credit is?

  • Last Updated:
  • Dec 16th, 2013 1:16 pm
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[OP]
Newbie
Mar 4, 2010
28 posts
7 upvotes

Can someone please explain exactly what a non-refundable tax credit is?

So I'm trying to learn a little bit more about finances and figured that a good place to start would be looking into my taxes and what I am eligible to claim. I believe that I'm eligible to claim the spousal tax credit as my wife didn't work last year. This is a non-refundable tax credit. Here is where I feel down the rabbit hole and haven't been able to climb out (all online explanations seem to go over my head). Does this mean that what ever amount I get as a credit is deducted from the amount of tax that I've already paid and then returned to me as a refund?

Any help someone could give me towards clearing up this confusion would be greatly appreciated.
6 replies
Jr. Member
Feb 18, 2013
130 posts
62 upvotes
Ottawa
fmdragon wrote:
Dec 16th, 2013 9:40 am
So I'm trying to learn a little bit more about finances and figured that a good place to start would be looking into my taxes and what I am eligible to claim. I believe that I'm eligible to claim the spousal tax credit as my wife didn't work last year. This is a non-refundable tax credit. Here is where I feel down the rabbit hole and haven't been able to climb out (all online explanations seem to go over my head). Does this mean that what ever amount I get as a credit is deducted from the amount of tax that I've already paid and then returned to me as a refund?

Any help someone could give me towards clearing up this confusion would be greatly appreciated.
A non-refundable tax credit is just that - literally. A tax credit (an amount that is applied to offset taxes owing) that is non-refundable. Hence, if you otherwise owe $1,000 of taxes, yet you have non-refundable tax credits worth $1,200, you won't get a refund of the residual $200 of unused credit, because it's non-refundable.
[OP]
Newbie
Mar 4, 2010
28 posts
7 upvotes
OMCA2013 wrote:
Dec 16th, 2013 9:55 am
A non-refundable tax credit is just that - literally. A tax credit (an amount that is applied to offset taxes owing) that is non-refundable. Hence, if you otherwise owe $1,000 of taxes, yet you have non-refundable tax credits worth $1,200, you won't get a refund of the residual $200 of unused credit, because it's non-refundable.
Got ya! But if I already paid in $2000 and have a non-refundable credit of $300, would I get that $300 back as I already paid $2000 and now only owe $1700 (barring any other tax credits)?
Sr. Member
User avatar
Oct 24, 2011
623 posts
178 upvotes
Timmins
A non-refundable tax credit can be found on schedule 1- personal exemption, spousal tax credit, child exemption, disability tax credit, etc. The ones you use add to your total non-refundable credit; the bottom line of these credits is that they are applied directly towards the taxes owing depending on your taxable income. (same thing on the provincial side) For example, if you owe $5000 in taxes based on your taxable income, and your non-refundable credits come to $1500; then the tax owing is 5000 less 1500 = 3500. But you have paid $4000 through your pay cheques, so you would then get a $500 refund (or however it works out).

Non-refundable means you do NOT get $$ back based on the credits. If you owe $1000 in taxes based on your taxable income and your credits come to $1500, the taxes owing are 0 and you do NOT get the $500 as a refund. The tax credits only bring your taxes owing down as far as zero and no further. (whatever you paid through your pay cheques have nothing to do with the credits)
Member
Oct 15, 2009
399 posts
128 upvotes
yep that's right. it only gives you money back up to what you've paid in taxes, unlike refundable tax credits where you would get them back, even if you paid no taxes that year.
[OP]
Newbie
Mar 4, 2010
28 posts
7 upvotes
Thanks folks, this was the clearest explanation I've been given so far on the topic! I'm now out of the rabbit hole!
Newbie
Oct 23, 2012
84 posts
13 upvotes
Mississauga
Thanks for raising this question, as I keep forgetting this every year too :)

I think the most confusing part of the term is the non-"refund"-able, as in some people think you won't be getting any cheques or "refund" in the mail for those credits. But what it basically means is that you won't be getting any refunds greater than whatever tax payable you owe.

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