As anyone who is a parent knows, having children can be an expensive enterprise. Fortunately, governments recognize this and have provided a number of tax deductions and credits related to activities involved with raising children. This section will discuss some of the tax implications associated with children. See the CRA website for more on family, childcare and caregivers deductions and credits.
Family tax deductions are intended to recognize that many expenses associated with having children are unavoidable. As a result, governments have allowed these expenses to be tax deductible. Some of these deductions are discussed in the following sections.
Child maintenance payments are not tax deductible and are not included in the income of the recipient, unless they relate to an agreement entered into prior to May 1, 1997.
If your former spouse’s support payments are in arrears, you may request that Canada Revenue Agency send his/her income tax refund and other federal cheques he/she may be receiving to you. This request can be made through a court order; your lawyer can apply for one under the Family Orders Enforcement Assistance Act.
Revenue Québec will step in to recover support payments, that are in arrears. Prior to legal and administrative methods being taken, a letter is sent demanding payment. They also work with those in arrears, to reach an agreement, to pay the debt.
Family benefits are money paid by the government to families to subsidize expenses involved with having children. Benefits allow parents to make the decision how to spend the funds, as opposed to prescriptive subsidy programs such as subsidized day care programs that only support certain spending options or behaviours.
The CCB provides an annual benefit of up to $6,638 for each child under six and up to $5,602 for each child six to seventeen years of age. The benefit is phased out as adjusted family income increases. An additional amount of $2,832 is paid for each child who is eligible for the child disability benefit.
These amounts are paid monthly to eligible families and are not taxable. The CCB does not reduce the amount eligible for the:
The child disability benefit (CDB) is a non-taxable monthly payment for parents of children under the age of 18 with severe and prolonged physical or mental impairments and who are eligible for the disability tax credit (DTC). Recipients should use tax form T2201, which is a certificate for the tax credit for people with disabilities.
The Canada Revenue Agency has calculators that you can use to estimate payments to which you may be entitled under various child and family benefits. Check out the CRA website.
Refundable tax credits are actually another form of government payment to you. They can be applied to reduce tax owing, create a tax refund, or provide a payment even if you don’t owe any tax. You have to file an income tax and benefit return in order to claim them. Federal refundable tax credits include the GST/HST tax credit and the working income tax benefit.
The non-refundable tax credit only gives you back some of the tax you owe. Once your income tax is at zero, you won’t receive any more. Any additional unused credits are forfeited. Federal non-refundable tax credits include the basic personal amount, medical expenses, charitable donations and the caregiver amount.
Your province may have additional tax credits of which you can take advantage. Check them out!
If your child attends a private school, check with the school to determine if a portion of the tuition fees you pay is eligible for a claim as a charitable donation.
If you are the spouse, supporting parent or grandparent of a child or other dependant eligible to claim the disability amount, you may be able to transfer any unclaimed amount to yourself. Up to 100% of the disability amount may be claimed on your income tax and benefit return or be split with another supporting person.
This tax credit may be claimed by family members who take care of dependants who have severe and prolonged physical or mental impairments. Both caregivers and their dependants must meet eligibility criteria. The dependant may be an infirm child under age 18 or a low-income adult, such as a dependent adult child.
Dependants no longer need to live in the same residence as the caregiver, but the credit will be reduced dollar-for-dollar, once their income exceeds an annual threshold.
There are a number of tax credits associated with post-secondary education. Depending on the circumstances, some of these credits may be transferable to parents or spouses. These credits will be discussed in the sections that follow.
Provincial tuition credits vary by province.