The Canadian government offers many tax deductions and non-refundable tax credits to Canadian taxpayers. A tax deduction applies to the pre-tax dollar amount directly against total income; a non-refundable tax credit applies to the after-tax dollar amount to the net federal and provincial tax. Tax deductions are more advantageous for taxpayers not in the lowest tax bracket because the non-refundable tax credits only provide a benefit at the lowest tax rate. For example, take a taxpayer with total income of $50,000 who pays $1,000 in eligible child care expenses and $1,000 eligible children’s fitness expense. In this scenario, the child care expense saves the taxpayer $220 of federal income tax while the children’s fitness expense saves the taxpayer only $150.
For families with minor children, the available tax deductions and credits are listed below:
1. Child care expense deduction – For each child who is under seven years of age at the end of the year, the deduction limit is $7,000. Children with qualified disabilities are allowed a higher deduction limit. The lower income spouse must claim the child care expenses, even if that spouse is not taxable.
Non-Refundable Tax Credits
2. Children’s fitness amount – each child under 16 years of age is eligible for up to $1,000 per year. See the eligibility criteria here.
3. Children’s arts amount – each child under 16 years of age is eligible for up to $500 per year. See the eligibility criteria here.
4. Amount for children – each child under 18 years of age at the end of the year is eligible for $2,255 ($4,313 if disabled and you can claim the family caregiver amount)
5. Tax family cut – couples with minor children may be eligible for up to $2,000 per year. See the eligibility criteria and more details here.
6. Medical expense – eligible medical expenses paid for dependants can be included as part of your total claim for the same period. Keep in mind of the threshold, which is 3% of the claimer’s net income.
7. Transfer of tuition and education credits – You can claim up to $5,000 of the child’s unused tuition and education credits.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.