INTRODUCTION: You don’t get to choose how your Non-refundable tax credits are used—the system already has an order.
When calculating personal income tax in Canada, many taxpayers assume that non-refundable tax credits can be applied in whatever order is most beneficial. However, the reality is more structured—and may affect your tax outcome. Taxpayers often want to know whether certain credits, such as tuition, are applied before others, and whether that sequencing could affect how much tax they ultimately pay or which credits may go unused.
In fact, there is a specific, legislated order in which non-refundable tax credits must be applied to reduce an individual’s federal tax payable. This order is set out in section 118.92 of the Income Tax Act and is strictly followed by the Canada Revenue Agency (CRA) when calculating tax liability. Understanding how this ordering works is essential, particularly for individuals with multiple credits, as it directly impacts the ability to fully
