Tax Shield

In Quebec, the term "tax shield" can refer to a specific refundable tax credit designed to protect low- and middle-income families from a reduction in their social benefits when their income increases. The Quebec tax shield is a provincial-level program that differs from the broader financial concept of a tax shield.

The Quebec tax shield credit is a refundable tax credit designed to help families receiving the work premium or childcare expense credit avoid losing benefits if their income increases. To claim it, you must be a Quebec resident, and it is reported on the TP-1 provincial return.

In a broader financial sense, a tax shield is any deduction, credit, or exemption that reduces taxable income and lowers tax payable. Common examples include business asset depreciation, interest on debt, eligible medical expenses, and charitable donations. Its value is calculated by multiplying the deductible expense by the tax rate—for example, $10,000 of interest in a 30% tax bracket creates a $3,000 tax shield, reducing taxes owed by that amount. The Quebec tax shield depends on your marital status and family income. You may qualify for 2024 if you were a Quebec resident on December 31, 2024, and you or your spouse are entitled to the childcare expense credit, work premium, or adapted work premium, provided the following conditions are met:

• Single on December 31, 2024: Your net income and eligible work income for 2024 (line 275) is higher than in 2023.
• Married or common-law on December 31, 2024: Your combined net income and either you or your spouse’s eligible work income for 2024 (line 275) is higher than in 2023.
• Claiming the tax shield: Check box 99 in Schedule C or box 5 in Schedule P, and Revenu Québec will calculate your entitlement. If you prefer to calculate it yourself, use form TP-1029.BF-V, but keep it for your records (do not enclose it).
• Splitting the credit: Married or common-law couples can split the tax shield using form TP-1029.BF-V.
• Note: You may still qualify for the tax shield even if your income is too high to claim the work premium credits in 2024.

Components

• One related to the work premium and adapted work premium.
• One related to childcare expenses.

How the two programs work together

• The Tax Shield and the Work Premium work in tandem to support low- and modest-income families.
• A family receives the refundable Work Premium credit based on their income.
• If their income increases the following year, their entitlement to the Work Premium may decrease.
• The Tax Shield is designed to help offset that decrease in the Work Premium credit, acting as a safeguard against losing benefits as income rises.

Example:

The Dubois family, with two children in daycare, had a 2023 income of $60,000 and claimed a childcare tax credit based on that income. In 2024, their income increased to $65,000, which reduced their childcare credit from $9,000 to $8,700, a $300 reduction.

Answer: As Quebec residents, they can claim the tax shield to offset part of this loss. Using form TP-1029.BF-V, the tax shield is calculated at roughly 50% of the lost credit, resulting in a $150 tax shield. When filing their 2024 Quebec return, the Dubois family reports the childcare credit on Schedule C and the $150 tax shield on line 460 of the TP-1.

Feature	Work Premium	Tax Shield
Purpose	Supplements the income of low- and modest-income workers.	Prevents a sudden reduction in benefits (such as the Work Premium) when family income increases.
Type of Credit	Refundable tax credit (can generate a refund even if no tax is payable).	Refundable tax credit.
Eligibility	Quebec resident with work income and family income below a specific threshold.	Quebec resident who was eligible for the Work Premium or childcare tax credit in the previous year, and whose family income has increased.
How to Claim	Complete Schedule P (Tax credits respecting the work premium) with your TP-1 return. Claim on line 456.	Complete Form TP-1029.BF-V (Tax Shield). Claim on line 460 of your TP-1 return.
Advance Payments	Available through advance monthly payments.	No advance payments.
Calculation	Based on current-year family income.	Based on the change in family income from the previous year to the current year.
Relevance	A key refundable credit providing direct support to low-income workers.	A complementary credit that softens the impact of income increases on other refundable benefits.
RL-19 Slip	Advance payments are reported on an RL-19 slip.	Not applicable.
Effect on Benefits	Increases total family income and potential refund.	Offsets reductions in refundable benefits due to higher income.