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:
The tax credit rate is dependent on the adjusted family income, as follows:
Note: The Ontario 2021 Budget announced that the CARE credit would be increased by 20% for the 2021 taxation year only.
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.
Ontario Childcare Access and Relief from Expenses (CARE) - from Budget 2019
The legislation for the tax credit is in Bill 100, Protecting What Matters Most Act (Budget Measures), 2019
Revised: August 22, 2021
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