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What is the Climate Action Incentive? Here’s how it affects your taxes.

You may have heard that as part of the Government of Canada’s climate change plan residents of Alberta, Ontario, Manitoba and Saskatchewan will receive a tax credit called the Climate Action Incentive when they file their 2019 tax return in early 2020 -an effort to protect the environment, grow the economy and increase your refund (yay)!

If you live in one of these provinces you will be charged a federal carbon tax beginning in April 2019 – it’s called a “fuel charge.” Rather than the fuel charge coming to you in the form of a bill, it will instead be added to the cost of your gas when you fill up at the pumps or added to your home heating bills. The idea is that a price on pollution gives people the incentive to make cleaner choices and encourages businesses to find clean solutions – which benefits us all as it protects the environment and helps to grow the economy.

However, don’t let the idea of extra expenses make you nervous. The goal of the Climate Action Incentive exists to offset the cost of the fuel charge and put some money back in your pocket.

Now, we know you may be thinking: what does this really mean when it comes to my tax return? We’re not ones to leave you hanging, so we’ve broken down everything you can expect from the Climate Action Incentive below.

Ok, so how do I get this Climate Action Incentive?
You’ll have to file a 2019 tax return in order to receive it – which we know you’ll be doing anyways. When you file, you’ll have to indicate on your tax return that you qualify – which you likely do as there are very few exceptions. (Exceptions are for those who were considered non-resident at any point during the year or who spent time in prison.) The amount you receive is based primarily on the size of your family, but you’ll have to decide which member of the family will apply for the credit, as you’re only allowed one credit per household. The amount you’re entitled to will then be added directly to your tax refund.

I don’t live in Manitoba, Ontario, Saskatchewan or Alberta; why am I not getting this tax credit
Residents of other provinces will not be charged the fuel charge and will therefore not be eligible for the Climate Action Incentive. This is because they either already have a provincial carbon tax or their provincial governments are working on a carbon pollution pricing system that meets the federal standard.

So how much can I expect to get back when I file?
We know you probably scrolled down to this part immediately because this is what we’re all dying to know, right? The amount of the Climate Action Incentive payments will be based on where you live and the size of your family. Unlike other tax credits, it will not be based on income – every household has the same rebate available.

The average family of four will receive an incentive of $809 in Saskatchewan, $486 in Manitoba, $448 in Ontario and $888 in Alberta. People who live in more rural areas will get 10% more than those in cities to account for the fact that they likely use more energy and that they don’t have as many public transportation options to reduce their fuel consumption.

Here’s a provincial breakdown based on household size and tax year:

2018    2019 2020 2021
First Adult $154 $224 $295 $360
Spouse $77 $112 $147 $180
Child $38 $56 $73 $89
Family of 4 $307 $448 $588 $718
2018 2019 2020 2021
First Adult $170 $243 $328 $402
Spouse $85 $121 $164 $201
Child $42 $61 $81 $99
Family of 4 $339 $486 $654 $801
2018 2019 2020 2021
First Adult $305 $405 $596 $731
Spouse $152 $202 $297 $364
Child $76 $101 $148 $182
Family of 4 $609 $809 $1189 $1459
2018    2019 2020     2021
First Adult N/A $444 $496 $600
Spouse N/A $222 $248 $300
Child N/A $111 $124 $150
Family of 4 N/A $888 $992 $1200

Ok, so after I pay the fuel charge and get the Climate Action Incentive payment back, how much money am I really left with?
Based on the numbers the government has estimated, the average household will actually be better off by about $46 to $195 dollars. Plus, you’re left feeling good about your contribution to the environment.

If you have any questions about the Climate Action Incentive payments, H&R Block Tax Experts are here to help. Visit here for more information on H&R Block’s expert review offer or to chat with a Tax Expert, visit an office near you, chances are you won’t have to travel far!