What Is The Climate Action Incentive (CAI)?

What Is The Climate Action Incentive (CAI)?

Written by Bryan Daly
Fact-checked by Caitlin Wood
Last Updated August 23, 2021

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:

  1. Fill out your income tax and benefit return
  2. Complete Schedule 14, which is part of your tax return
  3. 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).

Climate Action Incentive (CAI) Tax Credit FAQs

Can I claim the Climate Action Incentive if I live in a small or rural community?

Although you can qualify for the CAI if you live in the right province and have the proper requirements, the program is particularly beneficial to residents of small or rural areas, as they can receive up to 10% more money than people living in urban communities. This is because the government recognizes that people living in remote areas typically use more fuel and power in their daily lives (including the need for personal vehicles). On the other hand, urban residents may have the option of taking public transit, walking or biking to lower the amount of fossil fuels they have to consume.

Why can’t residents from other provinces claim this tax credit?

Remember, the Climate Action Incentive tax credit currently only exists in Alberta, Manitoba, Ontario and Saskatchewan.  Residents of the other provinces and territories don’t get charged for fuel, normally because their provincial government is implementing a carbon pollution pricing system that adheres to federal standards or the region already has a provincial carbon tax.   

How can I claim the Climate Action Incentive on my taxes?

Earlier, we talked about the 3-step method that you can use to claim Climate Action Incentive payments on your tax return. Additionally, you must answer “Yes” when given the question: “Will You Claim the Climate Action Incentive (Carbon Tax Credit)?”.  Unfortunately, if you can’t find this question, it’s probably because the Canada Revenue Agency has assessed you and determined that you aren’t eligible for the CAI tax credit.  

Can two single parents claim the CAI for a dependent if they share custody?

Sadly, no. Before you apply for the Climate Action Incentive, keep in mind that if you and your former spouse or common-law partner share custody of a dependent child, only one CAI refund can be claimed per child and splitting the payments is not possible. 

How will I receive my CAI payment?

The Climate Action Incentive program is a refundable tax credit, so it will either increase your income tax return or be added to your balance owing for the year. To complete the claims process, complete the section that identifies your province, as well as the number of adults, children, spouses and/or common-law partners you live with.  Luckily, the Canada Revenue Agency has assured all qualified beneficiaries that they will receive their CAI payments in the most accurate and cost-effective manner possible. Remember that only one claim for the Climate Action Incentive can be made per family.

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. 

Rating of 5/5 based on 1 vote.

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and traveling the world in search of the coolest sights our planet has to offer. Bryan uses the BMO Cash Back Mastercard to earn cash back on everything from boring bill payments to exciting excursions. He is also a strong saver, holding both a TFSA and an RRSP account in order to prepare for his future while taking full advantage of tax benefits.

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