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Ontario  ->  Personal tax credits -> Ontario Refundable Care Credit

Ontario Childcare Access and Relief from Expenses (CARE) Credit - Refundable

Ontario Taxation Act, 2007 s. 103.0.2

The Ontario 2019 Budget brought in a new Ontario Childcare Access and Relief from Expenses (CARE) refundable tax credit, which would provide about 300,000 families with up to 75% of their eligible child care expenses.  This tax credit will start with the 2019 tax year, and will be claimed on the tax return.  The tax credit will be based on family income and eligible child care expenses.  Lower income families would get a higher percentage tax credit.

From the CARE credit information of the Ontario 2019 Budget:

Starting with the 2021 tax year, Ontario intends to provide families with the choice to apply for regular advance payments throughout the year or receive a single payment when filing their tax returns after the year ends. Ontario will work with the Canada Revenue Agency and provide further details about advance payment delivery in time for the 2021 tax year implementation.

However, we have learned that while the government will continue to explore potential cost-effective options to give families the choice to apply for and receive advance payments for the CARE tax credit during the year, it is not moving forward with these advance payments at this time.

The CARE credit is based on family "adjusted" income and eligible child care expenses.

The CARE credit is included in the Detailed Canadian Tax and RRSP Savings Calculator.

To calculate adjusted income, the following are added back to line 23600 (line 236 prior to 2019) net income from the tax return:

bulletchild care expenses deducted (could be less than expenses incurred)
bulletdeduction for split income (won't be applicable to many people)
bulletEI benefit repayment deduction, and
bullet OAS clawback

The tax credit rate is dependent on the adjusted family income, as follows:

Adjusted family income

Tax Credit
Rate

Reduced by
$20,000 or less 75% n/a
over $20,000 up to $40,000 75% 2% for each $2,500 or portion above $20,000
over $40,000 up to $60,000 59% 2% for each $5,000 or portion above $40,000
over $60,000 up to $150,000 51% 2% for each $3,600 or portion above $60,000
over $150,000 0%  

Note:  The Ontario 2021 Budget announced that the CARE credit would be increased by 20% for the 2021 taxation year only.

Example:

Adjusted family income of $51,000:  The tax credit rate is 59% - 2% x ($51,000 - $40,000) / $5,000.

Since ($51,000 - $40,000) / $5,000 = 2.2, this is rounded up to 3.  This makes the equation:

59% - 2% x 3 = 59% - 6% = 53% tax credit rate.

The tax credit rate is multiplied by the allowable child care expense deduction.  If actual expenses incurred totalled $9,600 but the maximum allowable deduction is $8,000, the refundable tax credit would be 53% x $8,000 = $4,240.  For 2021 only, the credit would be $4,240 x 1.2 = $5,088.

If the adjusted family income was $50,000, the tax credit rate would be 55%, with a tax credit of $4,400.  For 2021 only, the credit would be $4,400 x 1.2 = $5,280.

Too complicated?  To make things easier, we've created a table showing all levels of the tax credit rate.

Adjusted Family Income CARE
Tax Credit Rate
Greater than and up to
$0 $20,000 75%
20,000 22,500 73%
22,500 25,000 71%
25,000 27,500 69%
27,500 30,000 67%
30,000 32,500 65%
32,500 35,000 63%
35,000 37,500 61%
37,500 40,000 59%
40,000 45,000 57%
45,000 50,000 55%
50,000 55,000 53%
55,000 60,000 51%
60,000 63,600 49%
63,600 67,200 47%
67,200 70,800 45%
70,800 74,400 43%
74,400 78,000 41%
78,000 81,600 39%
81,600 85,200 37%
85,200 88,800 35%
88,800 92,400 33%
92,400 96,000 31%
96,000 99,600 29%
99,600 103,200 27%
103,200 106,800 25%
106,800 110,400 23%
110,400 114,000 21%
114,000 117,600 19%
117,600 121,200 17%
121,200 124,800 15%
124,800 128,400 13%
128,400 132,000 11%
132,000 135,600 9%
135,600 139,200 7%
139,200 142,800 5%
142,800 146,400 3%
146,400 150,000 1%
150,000   0%

Ontario Resources

Ontario Childcare Access and Relief from Expenses (CARE) - from Budget 2019

Ontario Child Care Tax Credit (Childcare Access and Relief from Expenses (CARE) Tax Credit)

The legislation for the tax credit is in Bill 100, Protecting What Matters Most Act (Budget Measures), 2019

Revised: October 26, 2023

 

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