Personal Tax Tip – Tax Benefits and Deductions for Parents
Raising a family these days is expensive! Familiarize yourself with all the benefits and deductions to ensure you are taking full advantage of what you and your family are eligible to claim!
Child Tax Benefits
The Canada Child Tax Benefit (CCTB) is a non-taxable amount paid monthly to help eligible
families with the cost of raising children under 18 years of age. The CCTB may also include the Child Disability Benefit (CDB) and the National Child Benefit Supplement (NCBS).
To qualify for the CCTB, you must meet all of the following conditions:
- You must live with the child and the child must be under the age of 18;
- You must be the person who is primarily responsible for the care and upbringing of the child;
- You must be a resident of Canada; and
- You or your spouse or common-law partner must be a Canadian citizen, a permanent resident, a protected person, or a temporary resident who has lived in Canada for the previous 18 months and who has a valid permit in the 19th month.
In addition, you might be eligible even if your child lives with you on a shared basis. Shared eligibility exists where a child lives more or less equally with two separate individuals and each individual is primarily responsible for the child’s care and upbringing when the child resides with them.
Once the CCTB has been applied for, both you and your spouse or common-law partner must file an income tax return each year even if you have no income to report in order to continue receiving the CCTB.
Child Care Expenses
You might be able to deduct your child care expenses if they were incurred to enable you or a supporting person to earn employment or business income, attend a designated educational institution or a secondary school, or engage in grant research. Attendance at a designated educational institution or secondary school means attendance of at least one course that is at least three weeks long, for at least 10 hours per week (full-time program) or 12 hours per month (part-time program).
A supporting person includes your spouse, the parent of the child, or the person who claimed the child as a dependent. The supporting person must have lived with you at any time in the taxation year as well as at any time in the first 60 days of the following taxation year. An eligible child is defined as a child of the taxpayer or the taxpayer’s spouse, or a child dependent on the taxpayer or the taxpayer’s spouse and whose income for the year does not exceed the basic personal amount for the year. The child has to be under 16 years of age at some time in the year. However, the age limit does not apply if, during the year, the child is dependent on the taxpayer or the taxpayer’s spouse and has a mental or physical infirmity.
The maximum deduction is $11,000 for each child qualifying for the disability tax credit, $8,000 for each other child aged six or under at the end of the year, and $5,000 for each other child aged seven to fifteen at any time in the year and for a child with a mental or physical impairment born in 1998 or earlier for whom the disability amount cannot be claimed. The maximum total deduction may not exceed two-thirds of your earned income and the actual amount paid in the year for child care. The deduction can be claimed only by the lower income person unless the lower income spouse attends secondary or post-secondary school, is mentally or physically infirm, or for a period of at least two weeks was in a prison, hospital, asylum or other similar institution.
Child care expenses can include day care, nursery school, day sports camp, lodging at a boarding school or camp, and certain payments to babysitters.
Complete Form T778, Calculation of Child Care Expenses Deduction, and file it with your income tax return.
If you would like more information about claiming child care expenses, consult one of our knowledgeable Chartered Professional Accountants!
Family Tax Cut Credit
The Family Tax Cut credit is a non-refundable tax credit that can result in tax savings of up to $2,000 for couples with children under 18 years of age.
To be eligible for the Family Tax Cut credit, an individual must satisfy these conditions:
- Be a Canadian resident at the end of the year;
- Have an eligible spouse or common-law partner who is a resident at the end of the year;
- The spouses cannot have been living separate and apart from each other as a result of a breakdown of the marriage or common-law relationship at the end of the year and for a period of 90 days or more in the year;
- Have an eligible child under 18 years of age at the end of the year who ordinarily lives throughout the year with the individual or his/her spouse; and
- Both spouses must file an income tax return and must not elect to split any pension income they may have.
To calculate the Family Tax Cut credit:
- First, calculate the couple’s combined tax they would normally otherwise pay;
- Second, calculate the couple’s combined tax they would pay if the higher income spouse had notionally transferred half of the difference in their taxable incomes (a maximum transfer of $50,000) to the lower income spouse; and
- Third, calculate the difference in tax under the first and second calculations – this amount will be the Family Tax Cut credit that one of the two spouses can claim.
However, if the difference in tax is more than $2,000, the Family Tax Cut credit is limited to $2,000.
Note that because this is a “notional” income split, the higher spouse’s income is not actually reduced, and thus there are no provincial tax savings.
The Family Tax Cut credit is available for 2015, but is expected to be repealed by the government for subsequent years.
Children’s Arts Tax Credit
The Children’s Arts Credit allows parents with children under 16 years of age who participate in paid artistic, cultural, recreational, and developmental programs to claim a non-refundable tax credit based on eligible expenses of up to $500 per year per eligible child.
Some examples of eligible programs or activities include those in the fields that contribute to the development of creative skills or expertise in an artistic or cultural activity, or where a child acquires and applies knowledge in the pursuit of artistic and cultural activities. Artistic and cultural activities include the literary arts, visual arts, performing arts, music, media, languages, customs, and heritage.
An eligible program must be either a weekly program that is a minimum of eight consecutive weeks or a children’s specialty camp that lasts a minimum of five consecutive days. The full cost of a child’s membership in an organization will be eligible for this new credit if more than 50% of the activities offered by the organization include a significant amount of eligible activities.
An additional $500 disability supplement amount may be claimed for a child who is under 18 years of age at the beginning of the year and is eligible for the Disability Tax Credit if a minimum of at least $100 is paid for registration or membership fees for a prescribed artistic program.
Either parent may claim the credit or the credit can be shared. To prevent duplication, expenses already claimed under other credits (e.g. the Medical Expense Tax Credit) will not qualify.
To substantiate your claim come tax time, request a receipt from the organization that provides the arts program. As with many other credits, you are not required to actually submit the receipts with your return but you should retain any supporting documentation in case the CRA asks for copies at a later date to verify your claim.
Children’s Fitness Tax Credit
If you have a child who was under 16 years of age (or under 18 years of age and eligible for the disability tax credit) at the beginning of the year in which an eligible fitness expense was claimed, you may be eligible to claim the Children’s Fitness Tax Credit. Effective 2015, the tax credit is refundable.
This credit allows parents to claim up to $1,000 of eligible fitness expenses paid per year for each qualifying child if a child qualifies for the disability tax credit and at least $100 in eligible fitness expenses have been paid for the child, an additional bonus amount of $500 can be added to the eligible fitness expenses actually incurred.
To qualify for the tax credit, the activities must not be part of a school’s curriculum and must be either a minimum of eight consecutive weeks long, or in the case of camps, five consecutive days in duration. In addition, the activity must be supervised, suitable for children and require a significant amount of physical activity. For further information on what activities are eligible please refer to the Canada Revenue Agency (CRA) website.
To claim the Children’s Fitness Tax Credit, you should request a receipt when registering your children for qualifying activities. The receipts do not need to be submitted with your tax return but should be retained for six years in case the CRA asks to see them. The tax credit is claimed in the year the qualifying expenses are incurred, regardless of when the activity takes place.
If your child has attended an activity that qualifies as both a childcare expense and a fitness activity you must first claim the amount as a child care expense. Any portion that cannot be used as a childcare expense can be then claimed as a children’s fitness amount.
Consult a Chartered Professional Accountant to see how the Child Fitness Tax Credit rules may apply to you.
Child Fitness Equipment Tax Credit
The Child Fitness Equipment Tax Credit is available in British Columbia only, and it applies to 2015 and all subsequent years. It provides a non-refundable credit equal to 50% of the BC Children’s Fitness Tax Credit. You are not required to retain or file any additional receipts for the Child Fitness Equipment Tax Credit, beyond what is required to be retained for the Children’s Fitness Tax Credit.
Consult one of our knowledgeable Chartered Professional Accountants to see how the Child Fitness Equipment Tax Credit rules may apply to you.
Adoption Expense Tax Credit
The Adoption Expense Credit is a non-refundable credit in respect of an eligible adoption expense incurred in the adoption of a child under 18 years of age. The maximum credit claimable is $15,255 for 2015. The credit is reduced to the extent that the adoptive parent has been otherwise reimbursed, or is entitled to reimbursement, in respect of eligible adoption expenses.
Individuals may include eligible adoption expenses incurred during the adoption period, generally defined as the period that begins at the earlier of the time the child’s adoption file is opened with the provincial or territorial ministry responsible for adoption or a licensed adoption agency, and the time, if any, that an application related to an adoption is made to a Canadian court, and that ends at the later of the time the adoption is finalized and the time the adopted child begins to live with the adoptive parent.
To be eligible for the credit, a parent must have proof of an adoption in the form of a Canadian or foreign adoption order, or otherwise demonstrate that all of the legal requirements of the jurisdiction in which the parent resides have been met in completing the adoption. Individuals must claim the credit in the taxation year in which the adoption period ends.
Eligible adoption expenses include fees paid to licensed adoption agencies, court and legal expenses, reasonable and necessary travel and living expenses, document translation expenses, and mandatory fees paid to a foreign institution.
For more really useful tax tips, visit https://www.bccpa.ca/CpaBc/media/CPABC/News_Events_Publications/Publications/TaxTipsandRRSP/Tax-Tips-2015.pdf .