Tax credits... I don't understand?

I got my tax refund cheque back and the envelope included a sheet with a bunch of stuff on it.

Two things on it I don't understand are:

- Total federal non-refundable tax credits.... 1,726
- Total Ontario non-refundable tax credits.... 572

What do these mean? Why are they non-refundable?

Non refundable tax credits are used to reduce your tax to zero, but cannot be paid out beyond that. Your personal credit ($9600 this year), spousal and children, EI and CPP deductions, medical expenses, things like that, are all non-refundable credits. In order to level the playing field a bit, the actual amount you receive in credit against taxes is these amounts times the lowest tax rate of15%. What that means is that low income person will receive the same $ deduction for their personal credit as a rich person, even though the rich person would have paid far more in actual taxes. It also has the effect that the absolute minimum you can earn and still pay any taxes is $9600, since your personal credit wipes that amount out.

So non-refundable just means you can't get back what you didn't pay, essentially, it's just a tax term you really don't have to pay any attention to.

I'm not trying to be funny but they are probably nonrefundable because you will likely use them in the future...or they don't have the money to pay them...ok the last part I was being funny..certain types of income probably designates that amount as just credited for future use and not immediately refundable

It means that you can apply the credits against the taxes you owe to the federal and provincial governments, respectively. You use the credits to reduce your taxes by the amount of the credit or to zero, but not less than zero. Any unused portions of your credits is lost to you.

I am guessing that it is similar to what is done in the U.S.