When Newcomers Can Claim Full Non-Refundable Tax Credits In Canada: The 90% Rule Explained
Last updated: 2026-03-06 | CRA Reference: Section 118.94, Income Tax Act
What Is the 90% Rule?
The 90% rule allows a newcomer to Canada to claim the full amount of federal non-refundable tax credits — even for a partial year of residency — if at least 90% of their worldwide net income was earned in Canada during their period of Canadian residency (Section 118.94 of the Income Tax Act). Without meeting this threshold, part-year residents are generally restricted from claiming personal amounts under Division B of the Act.
Who Does It Apply To?
Scenario | Meets 90% Rule? | Can Claim Full Credits? |
Arrived July 1, earned $60K in Canada, $5K abroad | Yes (92.3%) | ✅ Yes |
Arrived July 1, earned $40K in Canada, $20K abroad | No (66.7%) | ❌ No |
Full-year resident | N/A (rule doesn't apply) | ✅ Yes |
Non-resident with 100% Canadian-source income | Yes | ✅ Yes |
The rule applies to individuals who became Canadian residents partway through the tax year. Full-year residents automatically qualify for all credits and do not need to apply the 90% test. If your residency status is uncertain, CRA's Income Tax Folio S5-F1-C1 explains how residential ties are assessed.
How to Calculate Your 90% Threshold
Step 1: Add up all net income earned worldwide during your period of Canadian residency in the tax year.
Step 2: Identify how much of that total was earned in Canada (employment, business, or Canadian rental income). CRA's guide for newcomers (T4055) provides a worksheet for this calculation on page 8.
Step 3: Divide Canadian income by worldwide income. If the result is 0.90 or higher, you meet the rule.
Worked Example: Maya arrived in Canada on May 1, 2025. From May 1 to December 31 she earned:
Canadian employment income: $55,000
Foreign rental income (still receiving from home country): $4,000
Total worldwide income during residency period: $59,000
Calculation: $55,000 ÷ $59,000 = 93.2% ✅
Maya can claim the full Basic Personal Amount (Line 30000) and other non-refundable credits.
What Credits Are at Stake?
If you meet the 90% rule, claimable credits include the Basic Personal Amount (Line 30000), Spouse or Common-Law Partner Amount (Line 30300), Age Amount (Line 30100), Disability Amount transferred from a dependant (Line 31800), and tuition amounts transferred (Line 32400). If you do not meet the rule, these credits are prorated or unavailable. This can result in thousands of dollars of additional tax owing, so calculate carefully before filing.
Key CRA Forms and Lines
T1 General — your main income tax return
Schedule 1 — Federal Tax (where non-refundable credits are totalled; included in the T1 package)
Line 10400 — Other employment income (foreign employment income goes here)
Line 12100 — Interest and investment income (foreign bank interest and foreign dividends)
CRA My Account — track your assessment and benefit payments after filing
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