While climate change has been a worldwide topic of debate for a long time, it would be extremely tough to get everyone on the planet to simply go green. Thankfully, the federal government recently introduced a tax credit called the Climate Action Incentive (CAI), as financial motivation for residents of urban, suburban and rural communities.
Want to know what Canada’s Climate Action Incentive (CAI) refundable tax credit is, how it can benefit your finances and how you can qualify? Keep reading to find out.
What Is The Climate Action Incentive (CAI)?
As mentioned, the CAI is a type of tax credit that you can claim on your income taxes. It was first introduced to residents of Manitoba in 2018. New Brunswick also joined the program but only for that year. Alberta, Ontario and Saskatchewan followed suit in 2019.
All of these provinces have a carbon tax known as the “fuel charge”, which residents must pay when buying gasoline at a pump or heating their homes. This additional tax is the provincial government’s way of getting its citizens to make as many green choices as possible and boosting the economy in the process.
Essentially, the Climate Action Incentive is meant to offset the cost of the carbon tax and give you some money back for your fuel-related expenditures. The CAI will be available in the same provinces (minus New Brunswick) for the 2021 – 2022 tax year.
Once you claim the benefit on your income taxes, the amount that you qualify to receive will be automatically added to your yearly tax refund or balance owing for the year.
Who Is Eligible For The Climate Action Incentive (CAI)?
Before you apply, it’s important to understand that only one resident per household is allowed to claim the Climate Action Incentive payment. Generally speaking, the beneficiary would be your spouse, your common-law partner or yourself.
To qualify for the CAI, the potential beneficiary must also:
- File a personal tax return every year
- Be aged 18 or older (if they are younger than the age of majority, they must have a spouse, common-law partner or be a parent living with a dependent)
- Be a permanent resident of Alberta, Manitoba, Ontario, or Saskatchewan
Qualifying For The Climate Action Incentive For A Dependent
If your child is 18 or older and living with you, they could qualify for the CAI by filing their own personal income tax return. Plus, they might be eligible for the federal GST/HST tax credit. As a parent, you can also claim the CAI on behalf of your child (or your spouse/common-law partner’s child) if, on December 31 of 2020, they were:
- Under 18 years of age
- Dependent on you, your spouse or your common-law partner
- Living with you in the same dwelling
- Not married or part of a common-law partnership
- Not a parent living with a child of their own
To claim the CAI for your child as a single parent, on December 31 of 2020, you must:
- Have a child living at home who qualifies as a dependent
- Not be married or in a common-law relationship
Who Is NOT Eligible For The Climate Action Incentive (CAI)?
Like any government tax program, the Climate Action Incentive involves certain requirements that can make you ineligible for the credit. For example, you cannot claim the CAI payment during 2021 for yourself, your spouse/partner or your child, if you are:
- Not a Canadian resident
- In prison or a similar facility for more than 90 days of the tax year
- Someone who qualifies for a child’s special allowance (CSA) payment
- A government servant or officer from a foreign country, like a diplomat, an employee of such a person or family member who lived with such a person.
Additionally, you can’t claim the CAI for a dependent who died before April 1st, 2021. The same rules exist for everyone who wants to apply for the Climate Action Incentive, including your spouse, common-law partner or dependent child over the age of 18.
These rules also apply to yourself when you want to claim the CAI on their behalf. Obviously, you can’t claim the CAI if you live outside of the selected provinces either.
How Much Money Can You Get Under The Climate Action Incentive?
The amount of money that you can expect to receive under the terms of the Climate Action Incentive tax credit program depends on a number of factors, such as:
- Your province of residence & citizenship status
- Your marital status (single, married or common-law)
- The size of your family (how many children/dependents you have)
Climate Action Incentive Payment Amounts From 2020 – 2022
Although the CAI does increase slightly with every fiscal year, unlike other tax credits, it’s not calculated according to your income. Here’s a breakdown of how much a household can receive per year under the Climate Action Incentive (CAI):
|Per First Adult||$490||$486||$600|
|Per Spouse/Common-law Partner||$245||$248||$300|
|Per Dependent Child||$123||$124||$150|
|Per Family of 4||$981||$992||$1,200|
|Per First Adult||$250||$328||$402|
|Per Spouse/Common-law Partner||$125||$164||$201|
|Per Dependent Child||$62||$81||$99|
|Per Family of 4||$499||$654||$801|
|Per First Adult||$226||$295||$360|
|Per Spouse/Common-law Partner||$113||$147||$180|
|Per Dependent Child||$56||$73||$89|
|Per Family of 4||$451||$588||$718|
|Per First Adult||$452||$596||$731|
|Per Spouse/Common-law Partner||$255||$297||$364|
|Per Dependent Child||$113||$148||$182|
|Per Family of 4||$903||$1,189||$1,459|
How Can I Claim The Climate Action Incentive (CAI) Tax Credit?
To apply for and claim Climate Active Incentive payments, all you have to do is:
- Fill out your income tax and benefit return
- Complete Schedule 14, which is part of your tax return
- File your tax return with the Canada Revenue Agency (CRA)
If applicable, the CRA will automatically add your Climate Action Incentive payment to your annual balance owing. Otherwise, the payment will raise your yearly tax refund. Check your tax package or certified tax software to find the forms you’re looking for. Once you receive it, you can see the CAI payment amount in the “Provincial” section of your tax return, on the Detailed Tax Summary page (line 45110 of your T1 slip).
Can I claim the Climate Action Incentive if I live in a small or rural community?
Why can’t residents from other provinces claim this tax credit?
How can I claim the Climate Action Incentive on my taxes?
Can two single parents claim the CAI for a dependent if they share custody?
How will I receive my CAI payment?
Want To Help Decrease Climate Change?
If you live in Alberta, Manitoba, Ontario or Saskatchewan, the Climate Action Incentive (CAI) tax credit could help you earn extra money on the fuel that you have to buy daily. While climate change is an extremely hard phenomenon to prevent by yourself, there’s no reason that you shouldn’t at least get the most of your tax return in 2021 – 2022.
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