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 (proposed)
The Ontario 2019 Budget proposed 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. Starting with the 2021 tax year, families can choose to receive advance payments throughout the year or receive a single payment when filing their tax returns after the year ends.
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 236 net income from the tax return:
- child care expenses deducted (could be less than expenses incurred)
- deduction for split income (won't be applicable to many people)
- EI benefit repayment deduction, and
The tax credit rate is dependent on the adjusted family income, as follows:
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.
If the adjusted family income was $50,000, the tax credit rate would be 55%, with a tax credit of $4,400.
Too complicated? To make things easier, we've created a table showing all levels of the tax credit rate.
More information can be found at Ontario Childcare Access and Relief from Expenses (CARE).
The legislation for the tax credit is in Bill 100, Protecting What Matters Most Act (Budget Measures), 2019.
Revised: May 12, 2019
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