What is the Ontario Staycation Tax Credit?
How to Claim Ontario’s Staycation Tax Credit on Your Tax Return
The recent pandemic has taken a toll on the travel industry, with overall tourism to Ontario showing a $24.90 billion decrease in 2021 alone. In an attempt to increase domestic travel, the Canada Revenue Agency passed a temporary Ontario Staycation Tax Credit for 2022.
This tax credit does not have income limitations, making it a great opportunity for taxpayers of all income levels to reduce their liability.
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How Does the Ontario Staycation Tax Credit Work?
Ontario residents can claim a credit of up to 20% of eligible expenses incurred for stays at a hotel, cottage, or campground in Ontario. This tax credit is designed to help Ontario’s tourism and hospitality industries recover from the financial impact of the recent pandemic by enticing local travel. This credit is expected to be taken by 1.85 million Ontario families.
The Ontario Staycation Tax Credit works based on eligible expenses incurred during the 2022 tax year. This is a credit, resulting in a dollar-for-dollar reduction of your tax liability. If you owed $400, you may now only owe $200.
How is the Credit Calculated?
The Ontario Staycation Tax Credit is calculated based on 20% of your eligible expenses, up to $1,000 for individuals and $2,000 for taxpayers that file with a spouse, common-law partner, or children. This results in a maximum credit of $200 for individuals and $400 per family.
Let’s say you are an Ontario resident and decide to go stay at a local hotel, which costs $500. You are a single taxpayer, meaning you would only be entitled to a credit of $100, which is 20% of $500. If your expenses reached $2,500, you would still capped at $200 for the individual limit and at $400 family limit.
There are no income limitation provisions worked into the Ontario Staycation Tax Credit. This makes it a great tax-saving opportunity for all residents of Ontario, even high earners.
How Do I Qualify for the Ontario Staycation Tax Credit?
To qualify for the Ontario Staycation Tax Credit, you must be an Ontario resident on December 31, 2022. This means that if you moved during the year outside of Ontario, you are no longer eligible. However, if you moved from another province to Ontario, you may qualify for the Ontario Staycation Tax Credit.
In addition, only one individual per family can claim the credit for the year. Eligible children are excluded from claiming the credit when they are still claimed as a dependent on their parent’s return. If the child files a separate return and is not claimed by the parents, there can be no double dipping of expenses.
What Expenses are Eligible for the Ontario Staycation Tax Credit?
Eligible expenses according to Ontario officials must be for a leisure stay of less than a month, including:
- Vacation Rental Properties
The stay must also have been between January 1, 2022 and December 31, 2022. When taxpayers stayed between the necessary period but paid the expenses in the next year, the travel still qualifies. Ontario bases qualification on the stay dates, not when the bill is paid.
The taxpayer must also have received a detailed receipt from the provider registered for the Goods and Service Tax or the Harmonized Sales Tax. Remember that the receipt doesn’t need to be paid as of December 31, 2022.
Furthermore, staycations can either be booked directly with the provider or through a third-party platform. Expenses paid through Vrbo, Airbnb, Expedia, and more do qualify. However, only the accommodation portion of the expenses can be claimed. This does include tour package expenses.
What Expenses are Not Eligible?
There are expenses that are specifically excluded from being eligible. These include:
- Stays at a timeshare agreement
- Stays on a boat
- Stays on a train
- Stays on a self-propelled vehicle
- Travel expenses not related to short-term accommodations (car rentals, groceries, parking, attraction fees, flights)
- Travel expenses that were reimbursed by an employer
- Travel expenses that were incurred for educational purposes
- Travel expenses that were incurred for work or other employment purposes
- Travel expenses that are claimed with the medical expense tax credit
It’s important to note that any travel expenses outside of your accommodations do not qualify, especially meals. In addition, if you are traveling for work and the expenses were not reimbursed, you still don’t qualify for the Ontario Staycation Tax Credit.
How to Claim the Ontario Staycation Tax Credit?
The Ontario Staycation Tax Credit is claimed when you file your personal Income Tax and Benefit Return for the 2022 tax year. This credit is refundable, meaning you can receive money back even if you don’t owe any taxes.
Before you claim the credit, you need to be sure you have the proper documentation. The following information can help substantiate your claim in the event of a CRA audit or inquiry:
- Location of the accommodation
- Amount of the accommodation portion of the stay
- Amount of GST or HST paid
- Dates of the stay
- Name of the person who paid the bill
Generally, a receipt from your place of stay will cover all of these items. Either scan in the receipt or file it with the rest of your 2022 tax documents. You should retain the receipts until the statute of limitations expires on returns, which is three years.
The Credit is Not Being Renewed
Currently, this tax credit is only available for the 2022 tax year, meaning you would have already needed to incur eligible expenses. The CRA does not have any plans on renewing the credit, making it important to leverage this tax benefit when you file your 2022 return.
If you have already filed your 2022 return and are eligible to claim the credit, it is still possible to make changes and amend amounts. However, it’s important to weigh the costs of amending to the prospective credit. You may end up paying more in professional fees than the credit is worth.
Overall, the Ontario Staycation Tax Credit is just one initiative by the CRA to help the hospitality and travel industries recover, while giving taxpayers an added tax break.
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How to Claim Ontario’s Staycation Tax Credit on Your Tax Return The recent pandemic has taken a toll on the travel industry, with overall tourism to Ontario showing a $24.90 billion decrease in 2021 alone. In an attempt to increase domestic travel, the Canada Revenue Agency passed a temporary Ontario Staycation Tax Credit for 2022.