Information Bulletin 6303, January 2006

Purpose

Purpose of the credits

The refundable property tax credit provides assistance for people with low to moderate incomes who own or rent a principal residence in Ontario.

The refundable sales tax credit provides sales tax assistance for people with low to moderate incomes.

Ontario refundable tax credits can be received even if you pay no income tax. If your tax credits total more than your taxes owing, the Canada Revenue Agency issues a refund based on the difference.

Eligibility Requirements

Basic requirements

You can claim the property tax credit if all of the following conditions apply:

• you were a resident of Ontario on December 31, and
• rent or property tax on a principal residence (as defined on page 3) was paid by or for you in the year, and
• you were 16 or older on December 31.

You can claim the sales tax credit if all of the following conditions apply:

• you were a resident of Ontario on December 31, and
• you were 16 or older on December 31, and
• no one else claimed an Ontario sales tax credit for you.

You cannot claim a sales tax credit if you were in prison or a similar institution on December 31, and you were there for a period of more than six months during the tax year.

Under age 19

Individuals aged 16 to 18 not claimed as dependants, or dependent children aged 16 to 18 not living with you on December 31 of the taxation year, may claim their own property and sales tax credits, if otherwise eligible. However, individuals cannot claim a property or sales tax credit if they were under the age of 19 on December 31 and they lived with someone who received a Canada Child Tax Benefit payment for them in the tax year.

Spouses and common-law partners

If you lived with your spouse or common-law partner on December 31, only one of you can claim the property tax credit for both of you. If one spouse or common-law partner is 65 or older, that spouse or common-law partner has to claim the credit for both of you.

If you marry, or meet the definition of common-law partnership in the taxation year, the occupancy cost for each person before is combined with the occupancy cost after marriage or common-law partnership, and one spouse or common-law partner must file for both.

Separation during the year

Spouses or common-law partners who live apart and maintain separate principal residences on December 31 for reasons such as partnership breakdown, or spouses or common-law partners who are involuntarily separated for health, education or business reasons, may each apply for a property tax credit.

On each tax credit form, each of you can include:

• a share of the property tax or rent for the part of the year when you lived together, plus
• your own property tax or rent paid after the separation.

For the period before separation, the property tax or rent paid may be divided any way you choose. However, the total amount of rent or property tax claimed, when combined, may not be more than the actual rent or property tax paid for the residence before separation.

Each spouse or common-law partner may claim a sales tax credit. However, only one person may claim the sales tax credit for a dependent child.

If you and your spouse or common-law partner separated during the year, but on December 31 are living together, only one property tax credit claim may be made. You may include rent or property tax paid by both spouses or common-law partners during the year. One spouse or common-law partner must claim the sales tax credit on behalf of both.

Death in the year

You cannot claim the property or sales tax credits on the final return for a person who died in the tax year.

If your spouse or common-law partner died in the tax year, you can claim the property tax credit and sales tax credit on your return but you cannot claim an additional sales tax credit for your deceased spouse or common-law partner. In this situation, you would not enter your spouse or common-law partner's net income when calculating the Income for Ontario Credits section of form ON479, Ontario Credits.

How to Claim Your Property and Sales Tax Credits

Form ON479

Calculate your claim on form ON479, Ontario Credits included with the federal income tax and benefit package.

Receipts

You do not have to include property tax or rent receipts with the Ontario tax credits form. However you must be able to provide receipts if your tax return is audited. Receipts should state the year, the total amount of rent paid, and the name and address of the landlord.

Sales tax credit amount

Only one sales tax credit may be claimed for each person.

Sales tax credit:

• The basic sales tax credit is $100
• The additional credit for your spouse or common-law partner is $100
• The credit for each dependent child under age 19 on December 31 is $50.  Only one person can claim a sales tax credit for a dependent child. In cases of separation or divorce, the credit must be claimed by the primary care giver (generally the recipient of the federal Canada Child Tax Benefit).

Property tax credit amount

Property tax credit:

• The basic property tax credit for individuals under age 65 is $250
• Beginning with the 2004 taxation year, the basic property tax credit for individuals age 65 or older was increased from $500 to $625.

Note You cannot claim a property tax credit for:

• more than one Ontario residence, such as a house and a cottage, for the same period. However, you can claim more than one principal residence if you have lived in more than one at different times in the year, and your total period of principal residence occupancy does not exceed 12 months
• a residence that you rent to another person. If you rent out part of your principal residence, you can claim a property tax credit only for the part of the residence in which you live. If you rent out your principal residence for part of the year, you can claim a property tax credit based only on the time you actually lived in the residence.

Maximum amount of property and sales tax credits available

The combined maximum amount of property and sales tax credits you can receive in one taxation year is $1,000.

For individuals aged 65 or older, the combined maximum amount of property and sales tax credits you can receive is $1,125 (beginning with the 2004 taxation year).

How to Calculate Occupancy Cost for the Property Tax Credit

Determining occupancy cost

Your occupancy cost only covers the period in the tax year that you lived in your principal residence in Ontario. A principal residence is a housing unit in Ontario that you usually occupy during the year. It can be a house, apartment, condominium, hotel or motel room, mobile home, or rooming house.

Exceptions:

1. A principal residence does not include a residence that does not pay full municipal and school taxes, or full grants instead of taxes.
2. Nursing homes, hospitals, charitable institutions, group homes or similar institutions do not normally qualify as principal residences. Residents of such institutions are not eligible for a property tax credit unless the institutions pay full municipal and school taxes or a full grant instead of taxes.

Homeowners

If you are a homeowner, occupancy cost is the property tax paid in Ontario on your principal residence in the taxation year including:

• tax charged for municipal and school purposes
• tax charged for local improvements to real property (if you paid a local improvement fee in one lump sum during the year or over a number of years, the amount paid in each year can be included in the calculation of your property tax)
• tax charged under the Provincial Land Tax Act or the Local Roads Boards Act or the Local Services Boards Act
• licence fees charged by municipalities and fees charged by school boards for mobile homes.

Property tax does not include:

• 'user charges' billed by a municipality (e.g., water)
• 'common expenses' incurred by condominium owners
• mortgage principal and interest
• property tax interest and/or penalty charges
• the portion of local improvement payments financed by government agencies
  Note You may claim your actual payment for the local improvement and property tax for the portion of a residence used for a business.

Renter

If you rented, occupancy cost is 20 per cent of the rent paid in Ontario in the taxation year including:

• a deposit for the last month's rent (in the year you use the deposit)
• property tax paid as part of your rent
• imputed rent

Rent does not include:

• utility charges such as water, electricity, parking, janitorial and recreational facilities which are separately itemized.
  Note If these charges are not separately itemized but included in your lease agreement, you may consider the full amount as rent.
• charges for board (e.g., meals, cleaning and laundry)
• amounts paid to relatives or friends as repayment of household expenses, unless these amounts are reported as rental income on their returns.

Imputed rent arrangements

Imputed rent is the value of services that you or your spouse or common-law partner provide to a landlord instead of paying rent. For example, if you are a farm labourer, domestic, apartment superintendent or a member of the clergy, you may have imputed rent. You may use the imputed rent to calculate occupancy cost for the property tax credit. You must also include the imputed rent as income when filing your income tax return.

Shared residence

If you shared a principal residence with one or more persons (other than your spouse or common-law partner), your occupancy cost is based on your share of the rent or property tax you paid for the year.

You own a rental property

If you rent a residence to another person, you cannot claim a property tax credit for that residence.

If you rent out part of your principal residence, you can claim a property tax credit only for the part of the residence in which you live.

If you rent out your principal residence for part of the year, you can claim a property tax credit based only on the time you actually lived in the residence.

Mobile or modular home on leased land

If you own your home but lease the land on which the home is situated, you may claim a property tax credit. Assuming that property tax, a municipal licence fee and/or a school board fee was paid, you may claim the occupancy cost either as rent or as property tax. Use the method most beneficial to you.

For example:

• use 20 per cent of the total rent paid, including any tax or fee as part of that rent, or
• use the property tax, municipal licence fee and/or school board fee for the home and lot.

Property tax is the actual tax on the home and lot. It is calculated by multiplying the assessed value by the local mill rate, and is not necessarily the amount considered 'tax' in the rental agreement.

University and college residences

You can claim $25 as your occupancy cost for the part of the year you lived in a designated university, college, or private school residence.

A residence is designated if it is part of a recognized educational institution and exempt from paying either municipal and school taxes, or a full grant instead of taxes.

You may clarify the status by contacting the residence administrator or the Ministry of Revenue which maintains a list of these residences.

Residents of institutions

If you live in a nursing home, charitable institution, home for the aged or a similar institution which pays full municipal and school taxes, or a grant instead of taxes, you may claim a property tax credit. You must deduct from your occupancy cost any accommodation subsidy from a government agency and charges for items such as meals, cleaning and laundry.

Co-operative housing

Residents of co-operative housing units, who do not have ownership interest, may claim a property tax credit based on rental payments only.

If you live and have an ownership interest in a co-operative, you may claim a property tax credit based on either:

• the property tax you paid to the municipality, or
• the property tax set by the co-operative for the unit you occupy.

Life lease arrangements

Residents who have paid a lump sum for the 'right to occupy' for life or a stipulated period are not registered on title as owners of their unit; therefore they are more like tenants than owners.

As a life lease resident, calculate your occupancy cost as rent using the following calculation: Divide the cost of the lease (lump sum) by the length of the lease (i.e., number of years - if not specified in the agreement, use 20 years as 'equivalent to life') and add the yearly municipal tax based on your unit as part of your rent. The resulting rental amount will be multiplied by the usual 20 per cent when determining your occupancy cost on form ON479, Ontario Credits.

Do not include common expenses or utility charges as part of your rental amount.

Enquiries

Municipal tax bills

Questions about your municipal tax bills should be directed to your local municipal office. You can find telephone listings for municipal offices in the Municipal Government blue page section of your telephone book.

Call us

For more information, or to obtain bulletins on other Ministry of Revenue programs, call the ministry:

• Toll-free: 1 866 ONT-TAXS (1 866 668-8297)
• Teletypewriter (TTY): 1 800 263-7776

Write to us

Ministry of Revenue
Tax Advisory Services Branch
Income Tax Related Programs Section
33 King Street West
PO Box 624
Oshawa ON  L1H 8H8

Visit our website

www.ontario.ca/revenue

This Information Bulletin is provided as a guide only. It is not intended as a substitute for the Income Tax Act (Ontario) and Regulations.

© Queen's Printer for Ontario, 2006

ISBN 0-7794-8600-5