Ontario budget: new tax credit for low-income individuals and families

Victor Fedeli, the Minister of Finance of Ontario, tabled his government's 2019-2020 budget yesterday afternoon. The budget contains few tax measures; the primary tax measure is the new refundable tax credit for childcare access.

New refundable tax credit for childcare access (CARE) 

Beginning in 2019, the budget proposes to introduce the Childcare Access and Relief from Expenses (CARE) refundable tax credit. The credit will be determined by multiplying eligible childcare expenses by the credit rate as follows: 

Total family income Tax credit rate
Up to $20,000  75% 
$20,001 to $40,000  75% minus 2% for each $2,500 above $20,000 
$40,001 to $60,000  59% minus 2% for each $5,000 above $40,000 
$60,001 to $150,000  51% minus 2% for each $3,600 above $60,000 
Greater than $150,000  0% 

For example, Ashley and Alex are spouses and earn $50,000 and $46,000 respectively. Their childcare expenses for the year were $7,600. They will be entitled to a CARE tax credit of $2,356, that is, $7,600 x 31% (51% - ([$96,000 - $60,000]/$3,600) x 2%). 

Individuals receiving the CARE tax credit can continue to deduct childcare expenses when calculating their net income under the current rules. In this example, Alex can deduct $7,600 from his income, as he has the lower income. 

Beginning in 2021, the government intends to give taxpayers the choice of receiving the CARE tax credit as advance payments or when filing their income tax returns. 

Low-income Individuals and Families Tax (LIFT) Credit

As announced in the fall of 2018, this new non-refundable tax credit will apply effective 2019. This tax credit will be equivalent to 5.05% of employment income, up to a maximum of $850, and will be reduced by 10% of the amount of individual net income greater than $30,000 or family net income greater than $60,000. The tax credit will be eliminated where individual net income exceeds $38,500 or family net income exceeds $68,500. 

Reduced Estate Administration Tax

The budget proposes eliminating the Estate Administration Tax on the first $50,000 of an estate's value. For all other estates with a value exceeding $50,000, the tax would be applied at the rate of $15 for every $1,000, or part thereof, of the value of the estate exceeding $50,000. This measure would apply to persons requesting estate certificates as of 2020. 

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This document is intended to provide information of a general nature, which is not to be considered as tax advice. Although reasonable measures have been taken to ensure the accuracy of this information, Desjardins does not provide any guarantee of its accuracy.