If you are a resident of Ontario and are planning a short trip anytime soon, you may consider opting for a staycation in the province. At least you get to receive some money back from the Ontario government for enjoying the thrill of beautiful places in the province. It certainly makes saving for a vacation a little easier. If this sounds too good to be true, it is not. Here’s how it works.
The Ontario staycation tax credit
The COVID-19 pandemic had a negative impact on the hospitality and tourism industry, as in-person gatherings were either prohibited or limited. As a result, the Ontario government aims to revive the sector through a temporary staycation tax credit. If you lodge in an Ontario-based accommodation in 2022, you can get up to 20 percent of your stay expenses as a tax credit when you file your income tax and benefit return.
Through the Ontario staycation tax credit, you can receive a $200 credit, $400, if you have a family. The staycation credit applies to a maximum of $1,000 per person. If you have a spouse, common-law partner, or children, your family can claim the credit up to a maximum of $2,000.
The Ontario staycation tax credit is refundable. A refundable credit means that even if you do not have an income tax payable in 2022, you will receive the credit as a refund from the Ontario government. If you have a tax payable, the staycation credit will reduce your taxes.
The credit reduces your taxes dollar for dollar. For example, if you owe income taxes of $1,000 and have eligible staycation expenses of $1,000, the Ontario staycation tax credit will reduce your income tax by $200 (20% x $1,000). You will then owe the Ontario government $800. If you do not owe any taxes, you will receive the $200 as a refund from the Ontario government as a cheque or direct bank transfer payment.
Who can claim the Ontario staycation credit?
If you are thinking of traveling from another province for a staycation in Ontario solely for the staycation tax credit, it may not be worth it. You have to be a resident of Ontario on the last day of the year, December 31, to claim the tax credit. If you were an Ontario resident in the early months of 2022 but moved to a new province before the end of the year, you cannot claim the Ontario staycation tax credit. Likewise, if you relocate to Ontario and remain a resident on December 31, 2022, you can claim the staycation credit for eligible expenses.
Only one member of a family can claim the Ontario staycation credit. So, if you have a spouse, common-law partner, or eligible children, either you or your spouse or common-law partner can claim the credit for the family when filing a tax return. Your children cannot claim the credit even if they are eligible.
Staycation expenses you can claim when filing your return
Your travel needs to be short-term, typically shorter than a month, to qualify for the Ontario staycation tax credit. Generally, you can claim the tax credit when you lodge in a hotel, motel, resort, lodge, bed-and-breakfast, cottage, or campground. If your stay exceeds a month, you may not be able to claim the tax credit.
Also, for your accommodation expenses related to your travel to be eligible, you need to lodge between January 1, 2022, and December 31, 2022. The expense eligibility does not depend on when the time you made the actual payments. For example, if you incur the accommodation expense before the end of the year but pay sometime in January 2023, you can still claim your expenses when filing your tax return.
Your staycation expense is only eligible when you or your family member, usually your spouse, common-law partner, or child, pays for the leisure time. If your friend gifts you a staycation in a short-term Ontario accommodation, you cannot claim the staycation expense. Also, if you are fortunate to go on a trip that your employer sponsors or reimburses, the Ontario government does not allow you to claim the related travel expense.
Ensure that you keep a receipt that shows the details of your travel expense, including the cost for accommodation, your name, accommodation name and address, Goods and Services Tax (GST)/Harmonized Sales Tax (HST), and dates.
What expenses are ineligible for the Ontario staycation tax credit?
You cannot claim all your travel costs through the staycation credit. For example, your travel needs to be for personal or family leisure time and not business purposes. Work-related travel expenses are not eligible for the Ontario staycation tax credit.
The Ontario staycation tax credit applies only to accommodation costs. You cannot claim expenses for feeding or costs related to a vehicle, flight, or any other means of transportation. Also, accommodation expenses in programs like timeshare agreements are not eligible for the tax credit. This is also not allowed: lodging in self-propellable accommodation such as on a train or boat. The Ontario government will not let you claim the related travel expenses.
Don't forget the details
Thanks to the Ontario staycation tax credit, you can get up to a $200 refund, or $400 for a family. The catch is that you stay in an eligible short-term accommodation in Ontario. Only the lodging expense is eligible: up to a maximum of $1,000 or $2,000 for a family.
The important part is who pays for the accommodations. It must be you, your spouse, common-law partner, or an eligible child. Otherwise, the Ontario government does not allow you to claim this credit. The staycation credit is temporary. It applies to trips you take on or before the last day of the year in 2022.
The Ontario staycation credit is refundable. What does that mean? It means that you receive the credit even if you do not owe any taxes for 2022. Remember to keep your trip expense receipts for when you file your tax return in 2023.