TOP UP TAX

The Top-Up Tax Credit, claimed on line 34990, is a new non-refundable credit for the 2025 to 2030 taxation years. It was introduced alongside the cut in the lowest federal rate to make sure that no one pays more tax because of that cut.

THE PROBLEM IT SOLVES?

Federal non-refundable credits are converted to tax savings at the lowest bracket rate. When the lowest rate fell from 15 percent to 14.5 percent (2025) and 14 percent (2026), every credit lost value. For most people the tax saved on the first bracket of income outweighs the lower credit value. But a person with large credit amounts (for example big medical, tuition or disability claims) relative to income could end up worse off, because their credits exceed the income taxed at the lowest rate.

HOW IT WORKS?

• The credit effectively keeps a 15 percent rate on non-refundable credit amounts that exceed the first bracket threshold ($57,375 for 2025 and $58,523 for 2026).

• In practice it adds back the difference in rate (0.5 percentage points for 2025 and 1 percentage point for 2026) on the portion of eligible credit amounts above the threshold.

• It is calculated on the line 34990 chart in the Federal Worksheet, and tax software computes it automatically.

• Most taxpayers will receive nothing from it because their credit amounts are well below the threshold.

WHO BENEFITS

• People with very large medical expenses, such as those paying for long-term care.

• Students using large tuition carry-forwards.

• People combining disability, caregiver and transferred credits.