[emilee]

I completed a tax return for a client with minimum tax carryover. He has a balance due. He also has the home renovation tax credit. When I enter the hrtc he actually owes more???? On S1 the minimum tax carryover is reduced, which I understand, as not as much is needed with the hrtc. But my question is why does the minimum tax carryover decrease on the Ontario tax? Does the minimum tax have to be the same on both the federal and provincial? I didn't think so. Is it a programming error?

[Peter@Intuit]

emilee, on 10 March 2010 - 07:47 AM, said:

I completed a tax return for a client with minimum tax carryover. He has a balance due. He also has the home renovation tax credit. When I enter the hrtc he actually owes more???? On S1 the minimum tax carryover is reduced, which I understand, as not as much is needed with the hrtc. But my question is why does the minimum tax carryover decrease on the Ontario tax? Does the minimum tax have to be the same on both the federal and provincial? I didn't think so. Is it a programming error?

Hi Emilee,

In 2009, the Ontario minimum tax carryover calculation was changed to 40.33% of the federal minimum tax carryover amount (which is claimed on line 44 of the ON428). So, if your federal minimum tax carryover claim decreases, your Ontario minimum tax carryover claim also decreases.

Previously, there were separate balances for federal and Ontario purposes (Ontario carryforward balances were maintained on the T1219-ON). The T1219-ON no longer exists due to the aforementioned change.

In your situation, where you are claiming a non-refundable tax credit for federal purposes only, I can see how that could potentially increase your combined federal and provincial taxes. However, you are preserving some of your minimum tax carryforward balance for future use against federal and provincial taxes.

I hope that this has cleared up the situation somewhat!

Peter

[emilee]

Thank you. It was actually quite bizarre that I entered the HRTC after the fact, or I would never have noticed.
I am going to pass on the HRTC in this particular case. Certainly something to watch for.