Tax Credit and Total Claim Amount Indexing

Enhancements were made to support annual indexing of eligible personal tax credit overrides entered in the tax credit fields on the Tax Credit Information card, introduced in Update 26C, under the Tax Credit Information Enhancements feature.

A new flow, "Run Federal and Provincial Tax Credit Indexing," is introduced to support this functionality.

Run Federal and Provincial Tax Credit Indexing Flow

The Run Federal and Provincial Tax Credit Indexing flow enables eligible personal tax credit overrides to adjust annually using the index rate for the employee’s jurisdiction. Indexing is cumulative across tax years.

Flow Inputs

The Run Federal and Provincial Tax Credit Indexing flow includes these input parameters:

Input What it does
Payroll Statutory Unit Reports or modifies data only for employees belonging to the selected Payroll Statutory Unit.
Tax Reporting Unit Reports or modifies data only for employees belonging to the selected Tax Reporting Unit.
Reporting Mode

Report eligible employees: Shows the existing overrides for employees eligible for indexing.


Create and report indexed overrides for eligible employees: Creates and displays indexed overrides for all applicable tax credit fields of eligible employees.


Report eligible employees for rollback: Shows tax credit field overrides created when the indexing process was last run. Any overrides manually created after the indexing process was run would not be displayed.
 

Rollback indexed overrides: Removes indexed overrides created when the indexing process was last run. The report shows impacted employees with any previous overrides after the rollback has completed.
Year An LOV that includes years for which indexing rates are available starting from 2027.
Payroll Relationship Group Reports or modifies data only for employees belonging to the selected Payroll Relationship Group.

Indexing Eligibility

A tax credit is eligible for indexing when:

  • An override for the tax credit field exists for the employee in a prior tax year.
  • The override was created using the individual tax credit fields introduced in Update 26C.
  • No override exists for the selected or a future tax year. 
  • An index rate is available for the employee's jurisdiction and selected tax year.

Indexed Override

Indexed overrides are created with an effective date of January 1 of the selected tax year.

An indexed override is created only once for the same tax year and index rate. Rerunning the flow with the same index rate doesn’t update the existing override. 

Individual tax credit amounts are indexed to two decimal places. The derived Total Claim Amount or Personal Tax Credits amount is rounded up to the next whole dollar amount.

Rollback of Indexed Amounts

Indexed overrides created by the most recent indexing run can be rolled back. Rollback restores the employee’s previous override values only when the indexed overrides haven’t been changed after indexing. 

Index Rates

Index rates are updated annually through legislative updates. You can view the rates in the Federal Tax and Provincial Tax value definitions groups by navigating to My Client Groups > Payroll > Calculation Value Definitions.

Federal and Provincial Tax Credits Subject to Indexing

Only personal tax credit overrides subject to indexing are adjusted using the applicable index rate. Overrides for all other tax credit fields retain their prior-year values.

Employees whose jurisdiction has no index rate for the selected tax year aren’t included in the indexing run, and no indexed overrides are created.

This table shows the personal tax credit fields on the federal and provincial Tax Credit Information card, other than Quebec, subject to indexing.

Personal tax credit field Is Indexed Note
Basic Personal Amount (BPA) Yes Indexed only for Federal and Yukon
Canada Caregiver Amount for Infirm Children Under Age 18 Yes  
Age Amount Yes  
Pension Income Amount Yes Indexed only for Ontario
Tuition (Full-Time and Part-Time) Yes Indexed only for Ontario
Disability Amount Yes  
Spouse or Common-Law Partner Amount Yes  
Amount for an Eligible Dependent Yes  
Canada Caregiver Amount for Eligible Dependent or Spouse or Common-Law Partner Yes  
Canada Caregiver Amount for Dependent(s) Age 18 or Older Yes  
Amounts Transferred from Your Spouse or Common-Law Partner Yes  
Amounts Transferred from a Dependent Yes  
  • Prince Edward Island: No index rate is published for Prince Edward Island. Overrides for Prince Edward Island aren't indexed.
  • British Columbia: Personal tax credit amounts are paused at the 2026 levels for the 2027 through 2030 tax years. Overrides for British Columbia aren't indexed. 
  • Manitoba: Basic Personal Amount is not indexed for inflation for 2027. The indexation was eliminated beginning in 2025 and remains subject to future legislative change. 

Quebec Tax Credits Subject to Indexing

This table shows the individual personal tax credit fields on the Quebec tax card subject to indexing.

Personal tax credit field Is Indexed
Basic Personal Amount Yes
Amount Transferred from One Spouse to the Other No
Amount for Dependents Yes
Amount for a Severe and Prolonged Impairment in Mental or Physical Functions Yes
Age Amount, Amount for a Person Living Alone and Amount for Retirement Income Yes
Amount for Career Extension Yes

Basic Personal Amount (BPA) Indexing

The BPA field is editable for the following jurisdictions:

  • Federal
  • Yukon
  • Quebec

Amounts entered in the BPA field for these jurisdictions are indexed annually using the applicable index rate.

For all other jurisdictions, the BPA field is read-only. The legislated amount for each tax year is delivered through legislative updates and isn’t affected by the indexing flow.

This feature eliminates the need to manually update the Total Claim Amount overrides annually and helps ensure payroll tax calculations use the correct Total Claim Amount.

Steps to enable and configure

You don't need to do anything to enable this feature.

Tips and considerations

  • Existing Total Claim Amount overrides without individual tax credit amounts continue to be supported but aren’t eligible for indexing.
  • Indexed individual tax credit amounts are stored to two decimal places. The derived Total Claim Amount or Personal Tax Credits amount is rounded up to the next whole dollar amount.
  • Index rates are updated through legislative updates and can’t be manually overridden.

Key resources

Refer to these documents for additional information.