Tax tips for parents

It’s that time of year again. Here are some of the more common tax credits and deductions parents should look into before filing their annual income tax returns.

There’s about a month to go before the April 30 tax filing deadline, and there are a few changes parents need to pay attention to this year.

First off, as many are aware, the Universal Child Care Benefit went up this year, to $160 per month for each child under age six, and a new benefit of $60 per month was added for each child aged six to 17. While you’ve probably been enjoying the extra cash, it’s time to pay the piper — a.k.a. the taxman. Those benefit payments are considered taxable income, but no tax was withheld at source. That means you’ve got to declare the money you received as income (generally, the lower-earning parent is required to report the income on his/her return).

On the flip side, parents claiming childcare expenses are able to reduce their taxable income by a little more this year, as the maximum limit per child has gone up to $8,000 (from the previous limit of $7,000) for each child under seven, and $5,000 (up from $4,000) for children aged seven to 16. Again, the parent with the lower income claims the deduction. The Canada Revenue Agency (CRA) website provides all the details on which childcare expenses are eligible for the deduction.

Also new this year is a change to the Children’s Fitness Tax Credit, which used to be non-refundable but is now a refundable federal credit. (A non-refundable tax credit reduces your federal tax, but if the total credits come out to more than what you owe, you don’t get a refund for the difference.) This credit allows you to claim eligible fees  of up to $1,000 per child (under 16) for physical activity programs, including team sports and lessons. Be sure to claim any fees you paid in 2015 even if they were for programs that did not start until 2016.

Here are a few other credits you may qualify for:

  • Children’s arts amount – You can claim up to $500 per child (under 16) for fees you paid in 2015 relating to an artistic, cultural, recreational or developmental activity (this also includes academic tutoring, language lessons and Scout and Girl Guide programs).
  • Family tax cut – Eligible parents with at least one child (under 18) can transfer up to $50,000 of taxable income from the higher-income spouse or common-law partner to the lower-income one. The maximum credit is $2,000.
  • Adoption expenses – Up to $15,255 in expenses related to the adoption of a child under 18 can be claimed.
  • Child’s tuition, education and textbook amounts – If you have children in college, university or other post-secondary institution, they should claim expenses incurred in 2015 on their own returns. If, however, your child’s income isn’t high enough to claim all education-related expenses, any unused amounts can be transferred to you, the parent. The maximum transferable amount from each student is $5,000 minus the amounts he or she uses.

Be sure to review all the ways individuals and families can save money on their income taxes in the 2015 General Income Tax and Benefit Guide. And remember to keep all your supporting documents for six years.

Keep the conversation going

Have you filed your taxes yet? Or are you a procrastinator (like me)? Post a comment below.

Disclaimer

The views and opinions expressed in this article are those of the author and do not necessarily reflect that of CPA Canada.

About the Author

Tamar Satov

Managing Editor, CPA magazine
Tamar is a journalist specializing in business, parenting and personal finance. She blogs regularly in this space with advice and anecdotes on her efforts to raise a money-smart kid.

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