Tax expert breaks down requirements, rationale, and inclusions for credit offered in certain provinces
Tax season is in full swing, and households across Canada are doing all they can to file their taxes on time or ahead of the April 30 deadline; for those who don’t want to face delays in their tax returns, the pressure is particularly high. And as Canadians try to keep track of their obligations and entitlements, residents of Ontario, Manitoba, Saskatchewan, and Alberta may want to remember one in particular.
“The federal carbon tax started to show up in April of 2019 as a fuel charge added to Canadians’ home heating bills or when they filled up at the gas tank,” explained Lisa Gittens, senior tax professional at H&R Block. “The idea was to encourage people across the country to make cleaner choices and find green solutions to fight climate change.”
While the carbon tax is charged across all provinces, certain provinces do not have plans or policies addressing climate change. In consideration of that, residents of those provinces are entitled to get back a portion of the tax collected through the so-called Climate Action Incentive or CAI.
While the CAI was first made available to residents of Ontario, Manitoba, and Saskatchewan during the 2018 tax year, Albertans will be able to claim the credit on their returns for the first time this year.
“Unlike other credits, your income doesn’t have a bearing on the CAI,” Gittens said. “It is calculated based on what the province believes an individual will be spending in the fuel charge, and the extra costs it will translate into for a family.”
The four provinces offering the CAI have laid out the incentive taxpayers are entitled to according to different schedules, all of which end in the 2021 tax year; since the incentive is indexed against inflation, the amounts people are entitled to increase every year. Aside from a basic credit, taxpayers may claim additional amounts by declaring a spouse or common-law partner, as well as any non-adult children they may have.
For the current tax season, taxpayers in Ontario can claim a minimum of $224 under the CAI, with an additional $112 for a spouse or common-law partner, and an extra $56 for every minor child under their care. Single parents, meanwhile, can claim $222 for each qualified dependant.
Albertans can expect to claim the greatest incentive this tax season, Gittens explained; unlike residents in other provinces, they are being reimbursed for carbon taxes collected over a 15-month period. Specifically, they’re eligible to a basic amount of $444, $222 for a spouse or common-law partner, and $111 for every qualified dependant, with single parents being entitled to $222 for every qualified dependant they declare.
“If two parents are sharing custody of one child, they will have to decide which one of them will claim the benefit for that dependant,” she said. “Unlike the Canada Child Benefit, the CAI can’t be split between parents. And if you have a foster child under your care, you can claim the Children’s Special Allowance, but not the CAI.”
Gittens emphasized that the credit is available to those who were residents in one of the four provinces as of December 31.
“We also remind clients who are living outside of major cities that they are eligible for an extra 10% added to the CAI,” she said. “In other words, those who live in a rural area are entitled to a greater amount than those in the greater metropolitan cities like Toronto.”
