Provincial Claim Factors: Dependants and the Ontario Tax Reduction
Most payroll withholding comes from the TD1 total claim amount, but a few provincial formulas also accept employee-specific quantities. This employer-focused guide explains Ontario's dependant-based tax-reduction factors, the evidence to keep on file, and how Beanflow applies them.
Last updated September 2026
At a glance
- Beyond the TD1 total claim amount, CRA's payroll formulas include a small number of province-specific inputs. The ones an employee can influence are called claim factors.
- Ontario is where Beanflow currently accepts claim-factor entries: qualifying disabled dependants and qualifying dependants under 19.
- For 2026 payroll withholding, Beanflow follows CRA's T4127 Factor Y, which specifies $554 per qualifying dependant ($544 in 2025). CRA's 2026 Ontario T4032 tables currently publish a different $575 amount, so the source conflict is noted below.
- Enter only dependants shown on the employee's TD1ON or supported by the employee's written or electronic request, and keep that evidence with the employee's records.
- Claim factors reduce Ontario tax only. They never change federal income tax, CPP, or EI.
What are provincial claim factors?
CRA's T4127 Payroll Deductions Formulas calculate provincial income tax from the employee's income, pay frequency, and claim amount. On top of that core calculation, a few provinces have special factors that adjust the result. They fall into three groups:
| Factor type | Examples | Where the input comes from |
|---|---|---|
| Automatic (engine-derived) | Ontario surtax and health premium, BC low-income tax reduction | Calculated from the employee's income alone. No employee input is needed or accepted. |
| Employee claim factors | Ontario dependant counts for the Ontario tax reduction | The employee's TD1ON or a written or electronic request. The employer enters a quantity and keeps the evidence. |
| Not supported by Beanflow | Labour-sponsored venture capital fund credits (MB, NB, NS, SK) | These require a qualifying share acquisition that payroll records do not capture. Beanflow rejects these claims rather than approximating them. |
The distinction matters because an employee claim factor is the only kind you should ever type into payroll yourself — and only when the employee's evidence supports it.
Ontario's dependant-based tax reduction
Ontario has a tax reduction that can reduce or eliminate Ontario income tax for lower-income employees. The reduction has a dependant component: in CRA's formula the dependant count is multiplied by a per-dependant amount, which raises the income level at which Ontario tax starts to apply.
| Claim factor | 2026 T4127 Factor Y amount | 2025 T4127 amount |
|---|---|---|
| Qualifying disabled dependants | $554 | $544 |
| Qualifying dependants under 19 | $554 | $544 |
CRA's 2026 publications currently conflict
CRA's 2026 T4127 payroll formulas specify Factor Y as $554 multiplied by qualifying disabled dependants and $554 multiplied by dependants under age 19. CRA's 2026 Ontario T4032 payroll tables instead show $575 and use “under age 18” for the child amount. Beanflow's payroll engine currently follows T4127 because it is the CRA formula publication used for computerized payroll calculations. Check the current CRA publications if this discrepancy is material to a payroll decision.
The practical effect: for a lower-income Ontario employee, each qualifying dependant can increase the Ontario tax reduction and reduce the Ontario tax withheld from each pay. Above the reduction's phase-out range the dependant counts have no effect, because the reduction is already zero. These Ontario Factor Y counts do not change federal income tax, CPP, or EI.
Factor Y is a payroll-withholding input used to estimate the Ontario tax reduction at source. The employee's actual Ontario tax reduction is ultimately determined when Ontario tax is calculated on the income tax return.
The formula and the annual amounts are published in CRA's T4127 Payroll Deductions Formulas (Ontario section, Ontario tax reduction).
What evidence should the employer keep?
A claim factor changes what an employee pays, so the entry should trace back to the employee — not to the employer's assumption about their family situation.
| Evidence | What the employer should retain |
|---|---|
| TD1ON Ontario Personal Tax Credits Return | The completed form showing the eligible dependants, kept with the employee's payroll records. The current form is on CRA's TD1ON page. |
| Written or electronic request | A dated request from the employee identifying the qualifying dependants. Electronic records should be protected against alteration, consistent with CRA's electronic-form expectations. |
As with the TD1 itself, these records stay with the employer. CRA does not ask for them up front, but it can ask to inspect payroll records later.
How Beanflow applies claim factors
- Enter the quantity and effective date on the employee's tax claims for the applicable year, and confirm that the employee's TD1ON or written request is on file.
- Claim factors are recorded per tax year. A change takes effect from its effective date within that year rather than rewriting past pay.
- Tax years stay separate. Editing the current year's factors does not automatically rewrite a previous year's claim. A prior-year entry should only be changed when you are correcting that year's payroll record.
- Unsupported factors are rejected, not zeroed. If a province has no such claim factor in CRA's formulas, Beanflow refuses the entry instead of silently storing a zero calculation.
- A zero quantity means no dependant-based reduction. The standard Ontario tax calculation still applies, including any income-based reduction the employee qualifies for automatically.
Important: a claim factor is not a TD1 claim amount
Dependants can appear in different places. Amounts claimed on the federal TD1 can affect the federal Total Claim Amount, while Ontario TD1ON amounts affect the provincial claim. The Ontario tax-reduction dependant counts described here are a separate provincial payroll-formula input. Ontario TD1ON amounts and Ontario Factor Y do not change federal withholding, but dependant amounts claimed on the federal TD1 can. When the applicable total claim amount itself is $0, the rules in TD1 & Multiple Employers apply instead.
Employer checklist
- Get the employee's evidence first — a TD1ON showing the dependants or a dated written or electronic request.
- Enter only what the evidence supports. Do not infer dependants from conversations or benefits enrolment.
- Record the effective date the claim applies from, and keep the confirmation that the request is on file.
- Ask for updated evidence when circumstances change. If the employee's dependant eligibility changes, use an updated TD1ON or written/electronic request rather than an employer assumption.
- Expect no effect at higher incomes. The Ontario tax reduction phases out, so the same counts can legitimately change nothing for a higher-paid employee.
The practical rule
Claim factors are employee-claimed, evidence-backed quantities — not employer estimates. For 2026, Beanflow applies CRA T4127's $554 Factor Y amount while CRA's T4032 Ontario tables currently show a conflicting $575 figure. Enter the employee-claimed quantities only from the TD1ON or a written or electronic request, keep that evidence, and follow the current CRA formula publication used by your payroll method.